Fixed Annuities are financial products that can serve a variety of needs. These contracts, assuming the funds are held to the end of the Guarantee Period, may provide a safe haven for growth with important guarantees related to principal.
Because returns are not taxed until withdrawn from the contract, Annuities enjoy the advantage of compounding in three ways:
Interest is earned on deposits
Interest is earned on interest
Interest is earned on money that would have gone to pay taxes, if that money had been placed in a product that is immediately taxable.
Within a well-developed financial plan, Annuities enjoy tax deferral on funds left to accumulate, perhaps deferring those taxes to retirement when a client’s income tax bracket may be lower. Annuities may also aid in the inter-generational transfer of wealth because Annuities, when structured to pay a death benefit directly to a named beneficiary, avoid the probate process.