They then must declare this as part of their annual income when they file their tax returns. On a tax-free investment, you don't have to pay any taxes on the income earned. A municipal bond is a popular example of tax-free investing. Be careful, though. Be clear on what you are getting into before making a tax-free investment.
Annuities are tax-deferred investments.
The great thing about tax-deferred investments when compared to taxable ones is that not only does the money you've invested go to work for you, but the money you would have paid in taxes stays in the account to earn even more for you. As a result, there are penalties for withdrawing your money prior to age 59 in most circumstances. Make sure to consult your tax advisor for information about your particular situation. A. All you need to do is write a letter to your insurance company to request your funds. The process is simple and the funds are generally available in a matter of days.