There are investment vehicles offered by insurance companies that give an incredible advantage over traditional savings vehicles such as bank savings accounts and certificates of deposits. The life insurance companies in this country offer programs called fixed-rate, tax-deferred annuities.
They typically offer slightly higher rates than banks and, best of all, these annuity accounts accumulate interest on a tax-deferred basis. This means that your account earns interest without causing your marginal tax bracket to go up. Money that accumulates free of current income tax will grow much quicker than funds that are taxable each year. These accounts typically accumulate free of current state income tax as well. Many retirees have also figured out that while the interest in these accounts is in the accumulation phase, no 1099 statements are generated. Therefore, the interest from these accounts while accumulating is not taken into account for taxation of your Social Security benefits!
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