The articles will then be archived for future reference. For now - we will start off with our first article printed on this page. An annuity is a financial product offered by an insurance company. When you put your money in an annuity, the insurance company agrees to pay you interest during both the accumulation and payout phases of your contract. Furthermore, all of the interest you earn in an annuity is tax deferred.
Tax deferral helps an annuity grow even faster than a taxable product.
With tax deferral the money you would have had to give Uncle Sam remains in the annuity contract-earning annuity until you withdraw it. This strategy gives you a good measure of control over your tax obligations that a taxable investment does not. Therefore you must limit the use of an annuity to retirement savings only. As far as withdrawals, annuities work much the same way as bank CD's. If you cash out before maturity there is a substantial penalty.