In fact, many financial advisors now refer to retirement annuities as “personal pension plans,” because they operate in a similar manner. Retirement annuities (or RA’s) are a type of fund in terms of the Pension Funds Act in that they are tax-advantaged investment vehicles designed for individual investors (versus employees who are participants in a workplace retirement fund).
With a retirement annuity, you can grow your savings on a tax-deferred basis. This means that there are no taxes due on the gain until the time of withdrawal. And, if you don’t access your money for many years, your account value can grow exponentially, because your money is earning a return on the principal, a return on the interest, AND a return on the funds that would have otherwise been paid out in taxes. It’s a triple-win! Keep reading if you’re still curious about what a retirement annuity is and how they work.