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Annuities
An annuity contract is created when an individual gives a life insurance company money which may grow on a tax-deferred basis and then can be distributed back to the owner in several ways. The defining characteristic of annuity contracts is the option for a guaranteed distribution of income until the death of the person or persons named in the contract. There are two main types of annuities: immediate and deferred.
There are some major differences between deferred and immediate annuities.
Immediate
- Income payments start right away (within 12 months of purchase).
- You choose whether you want income guaranteed for a specific amount of time or for your lifetime.
- Insurance company calculates the amount of each income payment based on your purchase amount and your life expectancy.
Deferred
- Two phases - accumulation phase where you let your money grow; and payout phase.
- During accumulation, money grows tax deferred until you take it out, either as a lump sum or as a series of payments.
- You decide when to take income from your annuity and therefore, when to pay taxes.
- Payout phase beings when you decide to take money out (you can take partial withdrawals, cash out or convert the annuity into a stream of payments which is called annuitization.
Please contact us if you would like to learn more about the annuities that we offer.
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