How a Tax-sheltered Annuity Plan Works

Video Transcript

"Hello this is financial adviser Patrick Munro. Today we are talking about how tax sheltered annuities work. Tax shelter means just that. Your accumulation of your money is sheltered from income tax as long as it's in the vessel of the annuity. So as long as you don't take the money out. You are allowed to put money in to the vessel for future accumulation and the benefit of the fact that it's tax sheltered means that it will grow upon growth and there is no taxes to be paid. However that being said once you hit a minimum age which is seventy and a half under IRS guidelines your qualified tax shelter annuity becomes under the guidelines of RMD, required minimum distribution, and that means that the vessel now has to slowly start to spend itself down. The insurance company will send you a check on your birthday of seventy and a half and every birthday beyond that. Which is ok, because the tax shelter annuity was designed for income in later life. This is financial adviser Patrick Munro talking about the benefits of tax sheltered annuities."