accounts and still want to put away more money for retirement, consider annuities. Annuities are contracts that insurance companies back. If you, the annuity
holder (investor), should die during the so-called accumulation phase (that is,
prior to receiving payments from the annuity), your designated beneficiary is
guaranteed reimbursement of the amount of your original investment.
Annuities, like IRAs, allow your capital to grow and compound tax deferred.
You defer taxes until you withdraw the money. However, unlike an IRA that
has an annual contribution limit of a few thousand dollars, you can deposit
as much as you want in any year to an annuity — even millions of dollars, if
you’ve got it! However, as with a Roth IRA, you get no upfront tax deduction
for your contributions.
Because annuity contributions aren’t tax-deductible, and because annuities
carry higher annual operating fees to pay for the small amount of insurance
that comes with them, don’t consider contributing to one until you’ve fully
exhausted your other retirement account investing options. Because of their
higher annual expenses, annuities generally make sense only if you have 15 or
more years to wait until you need the money.
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