Annuities can be a wonderful investment vehicle for everybody from young savers to senior citizens. They offer the advantage of tax deferred growth, and some tax qualified annuities even allow you to tax defer your contributions. Furthermore, man annuities offer a guarantee on your principle, and some with even a stated return rate. In addition, the top end can be tied to common stock market indicators, so your average returns will be much higher than with a savings account or CD.
Furthermore, a younger person can make periodic contributions to a deferred annuity to build wealth for retirement. A retiree can purchase an immediate annuity to roll over funds and receive monthly payments. Since annuities are flexible, offer good returns, investment safety, and tax benefits, they have become a popular investment.
However, you still need to shop carefully. Some annuities are front loaded, which means that your principal will decrease the minute you invest. If they are not front, loaded they wil certainly come with a surrender charge. In other words, you will incur a charge of a decreasing percentage of your investment if you withdraw your funds before an agreed upon length of time has passed.
Furthermore, even though many annuities guarantee your principal, some do not. Make certain that you understand which type of annuity you are buying before you purchase. Your stage in life, the amount you have to invest, and your risk tolerance will determine which product is right for you.
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