Because there are heavy tax penalties for pulling money from an annuity before the age of 60, investors must also consider their age when purchasing annuities. Young investors should purchase an annuity with the intention of enjoying many years of tax deferred interest accumulation before pulling money from it. The break even point, the point at which cashing in on an annuity returns the same value as a similar non-tax deferred investment, is usually around 15 years assuming withdrawal prior to age 60. The break even point can be much sooner for older investors if withdrawal does not begin until after the age of 60. For this reason, annuities can be a safe and steady investment option.
Many people now choose to make annuities the foundation of their retirement planning strategy.
When compared to other not-tax deferred investment options, annuities can financially out perform those options in addition to offering other benefits. They offer the added benefit of a guaranteed monthly income for as long as you live. When you have decided to purchase an annuity, your next choice should be what type of annuity you need. The difference between annuities really is about risk versus reward.