Tax-Deferred Growth!Annuity Premium Tax Funds
One of the biggest benefits of annuity premium tax funds is that funds can keep being deposited into the annuity without paying taxes on them until much later when those funds are withdrawn. Deferred annuities receive a great benefit from this. This works the same way that retirement funds do.
Premium payments are made for years into annuity premium tax funds, then the funds are not taxed until they are withdrawn later, when they eventually become a source of income. For this reason, investing in annuities should be considered a long term investment, since there are penalties for withdrawing the funds earlier.
When one invests in annuities, the funds will most likely grow over the years, providing additional income to be used later when they are withdrawn. If one is investing in an annuity fund that pays dividends throughout the life of the annuity, those dividends are re-invested into the annuity rather than paid out. This keeps them from being taxed, where they would be taxed if they were paid out instead.
Many people use annuities as retirement accounts for the tax benefits that they receive, as well as the steady income received later from them. Annuities can be sold by insurance companies, private agents, or even investment firms or banks.
The two phases of annuity investing are known as an accumulation phase, and a payout phase. During the accumulation phase, funds are built up to be invested and accrue, then during the payout phase they are payed out. The funds can be payed out in three ways, either as a lump sum (as in a death benefit,) or as a partial withdrawal, or as a complete withdrawal. The important thing to remember is, if you withdraw before the payout is set to begin, the penalties can be quite extensive.