Life insurance and annuities have many different types and applications.    If used properly and in the right context they can very valuable and used to your tax advantage.   Often times, they may be used in inappropriate places and then they don’t make as much sense.  For example, if a client needs to have access to all their money in 5 years, it doesn’t make sense to buy a 10 year surrender annuity product.   If the client can doesn’t need the money or to draw on it for 10 years, there are some terrific deferred annuities that they can purchase.

Life insurance and annuities are both considered insurance products.   They both have tax advantaged treatment and have a death benefit.   Life insurance cash value (if accessed correctly) and death benefits are both tax-free.   Both fixed, indexed, and variable annuities are all tax-deferred.  You won’t pay any taxes until you start pulling money out of the annuity.     Life insurance is different in the sense that it provides leverage for the client.  A premium is paid and creates a huge leverage with the death benefit.   For example, a client pays a monthly premium of $50, and the insurance company is on the hook to pay a $750,000 death benefit.   On the other hand an annuity pays out what is in it to the beneficiary.   For example, if your balance is $200,000 in an annuity, your beneficiary will get the $200,000.

Many annuities  offer bonuses now to incentivize clients to put their money in one of their products.  Some carriers offer as much as a 10 percent bonus on money put in to the annuity.   We work with a lot of clients who use the tax advantage of life insurance’s cash value to provide a tax-free stream of money at retirement.