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Is an annuity a great idea? Or a tax ‘time bomb’?

Q.: A friend of mine bought an annuity and raves about how much tax-free income he is getting and that it is guaranteed for life. Another friend of mine says annuities are a tax time bomb. Who is right? — Lester in Omaha

A.: Well, Lester I think the time bomb friend is more correct. Based on the description, I think they are talking about two entirely different types of annuities.

It sounds like your income friend has an immediate annuity. He is NOT getting tax-free interest income. He is getting a mo…
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