Saturday, May 16, 2009
DEFERRED ANNUITY
For past couple of years annuity has become a popular investment option. This happens because the amount of income that can be generated through annuity is more or less equal to the income that is generated though investment in stock market and with lesser risk. Therefore, to cater the needs of various people different types of annuities are formed. One such is deferred annuity. This is also called tax-deferred annuity.
In a tax-deferred annuity, a person is not required to pay any tax on their income until the money is not withdrawn from the plan. As a result, the income continues to grow faster in comparison to other types of annuities. Those who are interested to invest in deferred annuities have the options to pay only one premium or to make monthly payments.
Tax deferred annuities are of three types: one is fixed annuity, the second one is called the equity-indexed annuity and the third one is known as variable annuity. The first and the second type of annuity are planed in such away that it will not give high return. It will give less return but there is no risk of loosing the principal amount. In variable annuities, the earning can be good but the risk involved is also very high as income directly depends on market condition.
Deferred annuity is really a good tool of investment as this is also associated with tax benefit.
In a tax-deferred annuity, a person is not required to pay any tax on their income until the money is not withdrawn from the plan. As a result, the income continues to grow faster in comparison to other types of annuities. Those who are interested to invest in deferred annuities have the options to pay only one premium or to make monthly payments.
Tax deferred annuities are of three types: one is fixed annuity, the second one is called the equity-indexed annuity and the third one is known as variable annuity. The first and the second type of annuity are planed in such away that it will not give high return. It will give less return but there is no risk of loosing the principal amount. In variable annuities, the earning can be good but the risk involved is also very high as income directly depends on market condition.
Deferred annuity is really a good tool of investment as this is also associated with tax benefit.
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