Retirement planning is important to have a financial secured future for you and your family. Annuities can help you plan a better future. Annuities are smart ways to accumulate sufficient funds for retirement years. These are great retirement tools that generate income for as long as you live. By putting your savings into annuity funds, you get guarantee to receive tax-defer income for lifetime.

“An annuity is a type of investment that guarantees payments of specific amounts at specific times. You can either receive periodic interest or a lump sum payment. They come in two forms: fixed and variable. Fixed annuities are like CD's that pay a set rate of return. Variable annuities allow you to invest in stocks and bonds and the rate of return depends on how your investments do.”

Annuity is a tax-deferred investment contract between annuitant and insurance company. Insurance company issues annuity to annuitant for contributing specified money. Annuitant gets right to receive either lump sum or series of income payments for a certain specified period. The stage of contributions called accumulation phase and when annuitant starts receiving income payments, is called distribution phase.

Annuities offer large number of benefits to annuitants like proceeds from annuities pass directly to beneficiaries without delay, probate avoidance etc. but on the other side they have to face some challenges also. As per prevailing income tax rules all gains in an annuity are taxable on death or when you withdraw the money from annuity fund. Along with the growth of annuity, taxable gains at distribution also increase. At the death of the surviving spouse, all deferred gains are fully taxable as income to beneficiaries. If you purchase annuity without full fledge planning, then after your death your beneficiaries may have to pay heavy taxes at once.

To get rid of all these risks and to provide satisfactory funds to your heirs, you can transfer your annuity hoardings and annuity gains. By setting up the trusts you can safeguard the assets of an estate and help to reduce the tax burden. You can purchase special insurance contracts that provide income and estate tax free income to your heirs. Use exclusion ratio as it allows steady dispersions from an annuity to be distributed partly tax-free or fully tax exempted. It is better to seek the advice of annuity experts beFor purchasing an annuity because only a wise investment can protect your heirs form heavy tax burden.

For more info on annuities, click here or call an Annuity Specialist at AnnuityForLife.com, 1-888-261-6237