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Return To Annuity Article Archive   Search the Article Archives Investment via Annuities By Joanne Of all the forms of income generating investments, annuities are some of the most controversial ones. Annuity - derived from the Latin word annus - is basically an insurance product sold by insurance companies through authorised agents. This type of investment facilitates a series of payments in the future, in a defined manner, in exchange for an up-front payment of money. There is a group of individuals who think that annuities are a waste of time and there are much better tools of investment such as stock market or property. But then again both the above forms of investment are vulnerable to crash and do not score very high in comparison to annuities, with respect to safety. Annuities are commonly of two types first Deferred and the other Fixed. In the case of Deferred Annuity, the payments are made usually on a monthly basis for a number of years. This form of annuity makes sure that a younger person acquires a good income in his later years. In the latter form that is Fixed or Immediate Annuity, the purchaser pays a large capital sum usually to an insurance company and payments begin soon thereafter. One of the biggest hurdles faced by annuities today is inflation. At the outset the agreed sum to be paid out by the insurance company might look excellent and very heart warming, but inflation can erode the value of your investment at an alarming rate. Another draw back with annuities is that instead of being a long-term capital gain the earnings on annuities are taxable just as income is. Plus there are certain stringent rules and regulations governing the deposit that may not be customer friendly. One of which is that the customer cannot withdraw the money until he turns 59.5 years or else he would be charged a 10% penalty for withdrawing the same prematurely. So why should you consider Annuities as a mode of investment? Frankly any individual planning to invest in annuities should be the one who is not already contributing his maximum to other forms of retirement schemes. However, annuities are an excellent mode of investment for individuals in higher tax brackets. In those years of high tax liabilities, annuities make a lot of sense, as these savings are tax exempt. Tax is only due when income is received for the plan. That means you start drawing your annuity after you have stopped earning a high salary. About the Author: webmaster Online Investments Plan Annuity Calculations

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