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Tax Free Annuities

By Compuquotes Team on May 21st, 2008

Annuity

Annuities have become a very attractive option of investment for the investor that is uncomfortable making a big risk in other investment options such as the stock market. The benefits of tax-free annuities are also very appealing to today's investor that is seeking a secure investment with little to no risk, and the added benefit of tax-free returns. Annuities in fact are today's best choice when it comes to searching for a means of saving your funds in order to secure benefits beyond the age of retirement. Not only will tax-free annuities work to earn you more money and an additional income stream in your retirement years, but they are in themselves a security for your retirement future.

Many retirement programs today through benefits sponsored by your employer or through any other means for that matter, will be subject to specific contribution levels and to specific time constraints. You may not be able to contribute the amount of money that you want to within a specified period of time. However, if you purchase a tax-free annuity, then you as an investor can experience the benefits of a tax-free contract as well as the flexibility of choosing how much of a contribution you want to make. When you do this, the company through which you purchase your annuity will then pay you a specified percentage of the income you have contributed. This will all be clarified in your contract, and the income you collect when you settle your annuity will be tax-free.

Tax-free annuities are also available to employees that work in organizations considered not-for-profit or are an organization that is tax exempt themselves. These employees will also contribute to retirement plans within their organizations, however, instead of contributing to a 401K plan like many other employees, these employees will be contributing to a 403B plan. The 403B plan is a plan for retirement that has specifically been designed for organizations that are tax-exempt. The advantages of a 403B plan is that this allows investors to invest in tax free annuities that will ultimately provide additional benefits beyond a standard source of income for their retirement.

While the 403B plan is limited to employees of tax-exempt organizations and agencies, there are additional annuity plans that are also tax-sheltered that you can participate in if you are not employed by one of these organizations. These tax-sheltered annuities are managed through many insurance companies, and they will take your contributions through your paycheck. Your contributions will be an allotted amount that you determine with your annuities company, and this will be taken off your check prior to any taxes.

What this means for you is that your retirement funds will grow at a faster rate than it would had you simply put your money away into a savings plan or savings account. The interest you accumulate in your annuity will be tax-free and will accumulate over time, thus yielding you a higher income when you retire. When you retire, your tax-free annuity then will hold not only your principal amount that you a have contributed, but also the interest on the principal.

If you are looking for a way to secure your income in your retirement years, and are not comfortable with high risk investments, then tax-free annuities are probably your best option. Millions of retirees today are taking advantage of the many benefits that tax-free annuities have to offer.

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