The biggest advantages annuities offer is that they allow you to sock away a larger amount of cash and defer paying taxes.
Unlike other tax-deferred retirement accounts such as 401(k)s and IRAs, there is no annual contribution limit for an annuity. That allows you to put away more money for retirement, and is particularly useful for those that are closest to retirement age and need to catch up.
All the money you invest compounds year after year without any tax bill from Uncle Sam. That ability to keep every dollar invested working for you can be a big advantage over taxable investments.
When you cash out, you can choose to take a lump-sum payment from your annuity, but many retirees prefer to set up guaranteed payments for a specific length of time or the rest of your life, providing a steady stream of income.
The annuity serves as a complement to other retirement income sources, such as Social Security and pension plans.
