When Used Correctly, Deferred Annuities Deliver Powerful Tax Advantages

Deferred annuities offer powerful tax advantages. While annuity tax rules aren't too complex, understanding them and properly naming beneficiaries assures you'll get the maximum tax advantage.

Annuity interest is not taxed until it's withdrawn. With a deferred annuity, the owner decides when to withdraw interest and pay taxes on it.

The flexibility to wait until you need the income has many advantages for the annuity owner, as well as the spouse and beneficiaries. Deferred annuities include fixed-rate, fixed-indexed and variable annuities.

Other interest-paying investments -- such as money market accounts, savings accounts, certificates of deposit and bonds (except tax-free munis) -- create taxable income unless they're held in a retirement account. You must claim the interest earnings as income on