When you invest in your retirement, you want to make sure that it’s an investment worth making. Understanding what your fixed annuity includes will help you set your expectations for what your investment in the annuity will provide to your retirement funds. A question that is frequently asked by individuals that are interested in investing in an annuity is whether or not an annuity earns interest, similar to how a 401K does.

Annuities do earn interest, which is a comforting addition to the already secured income you’ll be receiving when you invest in an annuity. With a deferred annuity, there are two phases: the accumulation phase and the payout phase. The accumulation phase is when you’ll be contributing to the annuity, and the payout phase is when you will be receiving from the annuity. It’s during the accumulation phase that the money you contribute will earn interest.

Another benefit to an investment in an annuity is that your annuity earnings are deferred from taxing until you begin withdrawing the earnings of your account.  Like a 401K, there may be charges for early withdrawal, depending on where it is that you’re investing your annuity. Depending on what type of annuity you invest in, there are chances that the money you contribute and the earnings are tax deferred, and other annuities can be tax deferred even after the withdrawal of funds.

During the payout phase of the annuity process, the amount of money that you receive, as well as how long your payouts will come, depends on the type of annuity that you invested in. For fixed annuities, you will receive payments from your contribution and earnings for the amount of time that was specified in the contract. At this point in time, you may be taxed for the money that you are receiving and the earnings from interest.

Annuity Genius has a team of experts that are ready to breakdown the process, benefits, and benefits of investing in an annuity. We have your best interest in mind, so you can trust that we will find an option that is suitable for you. Contact us today for any questions that you have regarding an investment in an annuity.