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Annuities

Annuities are a controversial form of investment. Annuities are contracts, generally with insurance companies, that are either immediate or deferred. With an immediate annuity, the investor pays the insurance company a sum of money and within a year receives regular payments for life or a fixed period. With a deferred annuity, the investor makes payments to the insurance company over an extended period of time and then at a later date converts into an immediate annuity with regular payments for life or a fixed period.

Annuities also may be either fixed annuities with specific payment amounts or variable annuities where the payment amount depends on the performance of the underlying investments. Many seniors, looking for a safe source of income, pick fixed annuities that will pay them a specific amount for life regardless of how long they live. At first look, annuities might appear to be a good investment for seniors, but if you consider the exceedingly high charges, commissions and tax ramifications of them, they may not be an appropriate investment for many people.


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