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Most people shopping for an annuity are looking for a way to save for achilds college fund, or for a future retirement. Annuities are eitherdeferred or immediate. Immediate annuities require a lump suminvestment and start paying out on the following month, while adeferred annuity requires a monthly investment over a fixed periodwhich will then start paying out at some fixed date in the future. Ifyou are looking for a way to save money for retirement or a collegefund, a deferred annuity is the type of annuity you need, and are themost popular type of annuity. If youre setting up a trust fund forsomeone in order to give them an immediate income, youd choose animmediate annuity.When evaluating annuities there are a few things to consider.What, if any, are the tax advantages and liabilities of investing in different annuities?How are the payments from the annuity taxed?Is the annuity fixed or variable?What, if any, are the sales fees, maintenance fees, or load fees associated with the annuity?Is there a surrender charge, and what is the surrender chargeperiod? Is the surrender charge waived in the event of a prematuredeath or annuitization?In considering tax advantages of investing in different annuitiesyoull need to find out whether the investments into the annuity aretax-deductible or non-tax-deductible. Retirement plan annuities areusually tax-deductible, but the question should be asked and answeredwhen youre evaluating annuities. Tax liabilities should also beweighed.When evaluating how the payments from an annuity will be taxed, youllneed to know that the tax rate will depend on the origin of the funds.Payments from annuities paid for by tax-deductible contributions willbe taxed at payment at the recipients current income tax rate. If theannuity was a non-tax-deductible annuity, then when payments are madeonly the portion which is an investment gain will be taxed at therecipients current income tax rate. Also, depending on the individualrecipients entire financial picture, it is sometimes more advantageousto have recipient payments carry a lesser tax load than payments madeinto the annuity. If the person receiving the payment is less than the age of 59.5 orover 70.5, there are penalty taxes which may kick in, and should bediscussed thoroughly with your accountant, tax specialist or financialadvisor prior to making a decision about which annuity to choose. Theindustry sometimes uses the terms qualified or non-qualified torefer to whether funds paid into an annuity are tax-deductible.The difference between a fixed annuity and a variable annuity is in howthe payment to the recipient is structured. There are also somedifferences between fixed and variable annuities in how interest iscompounded on the payments made into the annuity.A fixed annuity will make payments of a fixed amount to the paymentrecipient for the term of the contract, usually until the death of thepayment recipient, with the insurance company guaranteeing both theprinciple and the earnings. A variable annuity guarantees a minimumpayment to the payment recipient, with the remainder above the minimumpayment varying depending on the performance of the managed portfolio.Each financial situation is different, and the help of a financialadvisor in evaluating different annuities is advised. There arewebsites which can help you in finding annuity rates, but the decision is onethat needs more expertise than most average people possess, due to thetax and estate ramifications both during the investment phase and thepayment phase of an annuity.
Comparing,Annuities,Most,peopl