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What Is An Annuity Tax Shelter?

what is a tax shelter annuity

Tips to using an annuity tax shelter. Find out why an annuity has such great tax benefits, and how it can secure your financial future.

An annuity tax shelter, is when someone invests money into an annuity, which is tax-free. Taxes are paid, when the annuity is mature, and starts paying allotments. The benefits are great, for someone who is in a high tax bracket. The ability to have financial security, and not have to work instead of retire, is also a bonus to the tax deferred investment.

Choosing an Annuity Tax Shelter

One of the best tax shelters, is a deferred annuity. There is a misconception with some, that deferred annuity means tax deferred. Although, almost all of them are tax deferred, they have the name because the time, or payments made to the purchaser are deferred. A deferred annuity, is a great investment for a person who wants to save

money on taxes now, and doesn’t mind paying them much later.

Who Benefits the Most?

The person who will benefit the most from an annuity tax shelter, is one who is in a high tax bracket. If someone knows that they will be in a lower tax bracket, or will have the ability to easily pay higher taxes later, they are an ideal candidate.

A Secure Future

Many people use a deferred annuity, as a tax shelter, but also to prepare for retirement. If one purchases and annuity, that pays out until death, they can be less stressed about the ability to support themselves. Taxes will be taken out of the payments a person receives, and if they choose to cash it out early, taxes and penalties. Most people trade the current tax bracket they are in, for a lower one in the future, so it isn’t a big concern.

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