What is annuities?

annuities is Annuities are contracts sold by life insurance companies (the seller must be a licensed insurance entity in your state). In their simplest form, you pay a sum of money (either a lump sum or a series of payments) and the insurance company makes periodic payments to you, beginning on the date in your contract and continuing for the rest of your life. The earnings on your annuity payments are not taxable during the accumulation phase of your agreement; the annuity payments are taxable as income when you receive them. Variable annuities permit you to place your payments in professionally managed funds, similar to mutual funds, and to control how these payments are invested during the life of your contract. Unlike mutual funds, variable annuities have insurance provisions and guarantees to preserve the value of the principal you pay into the annuity. They also generally carry higher fees than mutual funds. Annuities may entail extensive taxation and estate issues, and annuity buyers should make sure they’re aware of such issues.


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