7.5 Uses of Annuities
Annuities can serve many purposes, though the principal reason for investing in annuities is as a retirement tool.
Does the variable annuity have a loan value?
Yes. Some companies include a loan provision; however, depending on tax qualifications, some group contracts do not permit a loan provision.
Savings accounts are typically not structured for retirement income. Savings accounts are generally used for major purchases or emergency situations. Annuities, on the other hand, are created so that a steady stream of income can be derived at retirement.
Annuities offer the following features.
- Safety of principal
- Tax deferral
- Diversification
- Competitive yields (enhanced by tax deferral)
- Liquidity
Besides retirement, annuities can be utilized for any purpose in which a steady stream of income would be beneficial, such as funding a college education.
