What is a Tax Sheltered Annuity? First let's define an Annuity: an Annuity is a series of annual payments. It was first developed years ago to prevent someone from out-living his or her money. Since the creation of annuities many different types have shown up. What is an Annuity? It is a form of retirement savings account that grows tax deferred. At retirement, you may withdrawal money in a variety of ways:
Tax-deferred savings grow much faster because you don't pay taxes on the interest each year. Taxation is deferred until you withdraw the money at retirement. A Tax Sheltered Annuity is a contract between you and the insurance company that allows you to reduce your taxable income through payroll deduction. The money is taken out PRIOR TO TAXES and put into a retirement account for you. Everything in your account grows tax-deferred, in other words you pay no taxes on the interest until you take it out, therefore you are able to accumulate more money. An annuity policy is issued through an insurance company. Be sure you completely understand your annuity contract. Make certain your company is rated A+ with AM BEST, Standard & Poors, Moodys and Duff & Phelps. Why should you save through payroll deduction? Because it's EASY and PAINLESS!! |
