What Are Some of the Tax Advantages and Disadvantages of Owning an Annuity?

Juliette Fairley - What are some of the tax advantages and disadvantages of owning an annuity?

In this video, Juliette Fairley explains that annuities offer tax-deferred growth, meaning you’re not taxed on earnings until withdrawal, but the downside is that withdrawals are taxed at ordinary income rates rather than the typically lower capital gains rate.

Video Transcript
Some of the tax advantages of owning an annuity include the fact that they're tax deferred, so they grow tax deferred. You are not taxed immediately for any of the growth you are taxed when it's dispersed, when the money is dispersed. The downside is that when you do cash out, whenever that is, whether it's now or later, you are going to pay income tax rate rather than the capital gains rate. And the capital gains rate is preferred for most people because it's lower than the income tax rate.