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• Overview
• What is an annuity?
• What types of annuities are there?
• What does "annuitize" mean?
• What are "sub accounts" or "underlying investments"?
• How are annuities "tax advantaged"?
• How long do annuity payouts continue?
• What are the advantages of an annuity compared to an IRA or 401(k) or other retirement plan?
• What fees and charges are associated with annuities?
• Is an annuity liquid?
• Where do you buy annuities?
• Who is promising your return?

Annuities

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How are annuities "tax advantaged"?

During the accumulation phase of a deferred annuity — when your money is invested for growth — all earnings accumulate and compound free of current taxes. This means your money can grow faster than it would in an investment that loses money to taxes each year.

In the payout phase, the portion of the payout that is investment earnings (as opposed to the principal you invested) will be taxed. The portion of the payout that is return of principal may or may not be taxed, depending on the source of the money originally used to fund the annuity.