We should have a solid source of steady income to prop us in the wobbly condition. Even we are earning handsome pay package at present, we may have to witness to a gloomy scenario in future. The recent recession period has shown us that success is temporary and you should be prepared to bear the pang of failure in the event of an unexpected crash in the market.
Of a myriad of ways to secure your future, tax deferred annuity is a popular option. Annuity is a strong financial source to help you be buoyed up in times of adversities. You have to pay a certain amount for a specified time. Insurance company gives you a sum of money out of the interest on your investment. Annuities are of several types and tax deferred annuity is the most popular of them.
An annuity of 'tax deferred' type provides the facility of deferring the tax payment on the investment till the time of withdrawal. The length of the time over which the investment is to be made is decided at the time of purchasing the annuity. The amount to be forked out is also settled at that time. Once the 'lock in period' rolls away, you are free to withdraw the amount.
Remember that tax deferred annuity allows you to withdraw only a part and not the total amount at a go. The most positive aspect of such annuity program is that no tax will be deducted from your investment in 'lock in period'. It will certainly help in the growth of your fund.
Many nourish the conception that tax deferred annuity is completely tax free but it is only far from reality. As the name suggests, tax is only deferred in such type of annuity and deduction is made at the time of withdrawal. Tax deferred annuities may be of either fixed or variable nature. In case of fixed type, you will have a fixed rate of interest whereas the rate varies according to the peaks and dips of the market condition in case of variable tax deferred annuity.
