Annuities and IRAs provide tax-deferred growth.
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Individual Retirement Arrangements and annuities both provide you with the chance to grow your money on a tax-deferred basis. In fact, these investment types are not mutually exclusive since you can buy an annuity with IRA funds. However, despite the similarities and use of annuities in IRA plans, there are significant differences between these investment options.
IRAs contain sums of money that you have kept separate from your taxable accounts. You can contribute money to a traditional IRA on a pretax basis and no taxes are assessed until you
make withdrawals. You can use IRA money to buy a variety of investments including stocks, bonds, certificates of deposits, annuities and mutual funds. In contrast, annuities are life insurance products designed to provide you with an income stream. The income stream begins within a short space of time with an immediate annuity, while deferred annuities provide you with income at some point in the future. Deferred annuities may contain sub-accounts holding mutual funds or income generating investments like bonds or CDs. Some annuities also include death benefits that provide your beneficiaries with a payout if you die before the term ends. Additionally, annuities, unlike IRAs, can have more than one owner.