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Annuities are contracts sold by life insurance companies (the seller must be a licensed insurance entity in your state). In their simplest form, you pay a sum of money (either a lump sum or a series of payments) and the insurance company makes periodic payments to you, beginning on the date in your contract and continuing for the rest of your life. The earnings on your annuity payments are not taxable during the accumulation phase of your agreement; the annuity payments are taxable as income when you receive them.  You may place your payments in professionally managed funds, similar to mutual funds, and control how these payments are invested during the life of your contract. Annuities may entail extensive taxation and estate issues, and annuity buyers should make sure they’re aware of such issues.

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