ANNUITIES

Annuities are the reverse of life insurance. In a life insurance policy, you pay the insurance company a small amount (the premium) and they pay a large amount when the insured person dies.

With an Annuity you pay the insurance company a large sum, either all at once or over time. The insurance company then invests this money. At some point in the future, you withdraw the accumulated funds on a monthly basis (or in a lump sum).

If you do it on a monthly basis, the annuity will keep the money coming for as long as you live, even if you have used up your entire accumulated value. So you might say that life insurance protects your beneficiaries if you die too soon and an annuity protects you if you live too long.

Annuities can be set up using savings dollars, or pre-tax dollars like an IRA or if you get a mandatory distribution from your retirement fund (rollovers). The accumulation in annuities is not taxed, until you begin making withdrawals. Annuity companies usually pay you higher interest than banks.

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