Value for the Future

Section 7-3

Notes

• An annuity is an investment plan that has forced savings and tax deferral. This allows the investment to build without being taxed every year. This allows the investment to climb much faster. Once the annuity is cashed in, then the taxes are taken out, but at a lower rate because most people are retired and their lower yearly income puts them into a lower tax bracket.

Notes

• IRA – Individual Retirement Arrangements• This also has tax shelter and allows an

employee to put away $2000 a year. If the income of the employee is below a certain amount, the IRA investment can be fully deducted on taxes. Employee with no employer pension plan are also exempt.

Notes

• You may take money out of your IRA if you are disabled or are 59 and ½ years old.

• Also you may choose the institution in which you invest your money, bank, brokerage group, mutual fund group.

Notes

• An example of a common employer pension plan is a 401(k). The employer can make tax sheltered contributions larger than a regular IRA.

Notes

• Some believe it is a better investment to get term life insurance over cash-value and invest the difference in your own investment.