Annuities first shown up in the eighteenth century but they have changed since then. In the twentieth century, annuities become available to you and me. So, what is an annuity?

How can an annuity be of benefit?

First off what is an annuity? The easier answer is an agreement between you and your insurance provider. The provider must have a specific license to do so, and varies from state to state. They are regulated by the state insurance commission. The agent’s license must be from the National Association of Securities Dealers (NASD) or the Securities and Exchange Commission (SEC) alone with their life insurance license.

Terms are simple you pay a sum of money to the provider in one of two ways; big lump sum or in smaller payments and they schedule payments to you with interest. Your payments can be immediately or delayed until retirement. Theses funds are tax deferred until you start receiving payments.

Fixed, Variable, or Equity-base Annuity

These choices allow you to if you want a guaranteed minimum interest rate or one that changes with the stock market. Equity-base, your interest rate is based on an equity guideline like S&P 500.

Choosing payment options

Do you take payment now or later? If near retirement now is most likely best only if over 59 ? years of age or pay penalty for early withdraw. Immediate payments would also require you to put a lump sum in not payments. If you start an annuity in your 30’s leave it sit a while. Start payment when you plan to retire but before 70 ? to avoid penalties there.

The benefit to annuities

Annuities build interest, is tax free until withdraw and gives extra security in old age.

Annuity a personal retirement account, let’s face it we might not have social security in 20 or 30 years. You plan how you get paid, when you get paid and taxes are on hold until you get paid.