Annuities lend themselves particularly well to funding retirement and, in some cases, education costs. There are two reasons to employ an annuity as one of your investment vehicles:

• to save money for a long-range goal
• to guarantee a stream of income for a period of time

One problematic aspect of annuities, depending on your situation, is that the money cannot be accessed during the growth period without incurring taxes and penalties. These penalties mean that annuities are best implemented when the money can remain in the annuity for the term of the annuity, which is why this particular investment works well for retirement needs or for education funding where the depositor will be at least 59 ½ when the withdrawal period begins. If the annuity is held in a child's name, under the provisions of the Uniform Gifts to Minors Act, the child will pay taxes and penalties on the earnings when the time for withdrawals arrives.