Not sure what annuity loans are? Let me explain.
The economy has hit a lot of would-be investors hard. Many people put money into great investments, only to find that they are short on cash due to loss of employment, forced retirement, difficulty making payments on home mortgages, etc.
Many investors are looking for liquidity just to have cash on hand for necessities or to be able to jump on good investment opportunities when they come up in the market. One attractive solution for owners of annuity policies can be to take out annuity loans. An annuity loan is basically a loan to yourself against an annuity insurance policy you own as collateral.
Why would you want to loan yourself money and pay the insurance company writer of the annuity policy interest? Because the tax implications of taking your investment out as a distribution are pretty severe. You could pay a pretty hefty tax bill by taking an annuity distribution, whereas if you take a loan against your annuity policy, you won’t generally have to do that (consult your tax advisor, of course).
When you’re short on funds, or want to have capital In this situation, your best alternative may be annuity loans.