Eventually, you will be faced with taxes on your tax-deferred annuity growth.  Although aimed at agents, the article "Twenty Things You Must Know About Annuity Taxation," is a very useful tool to educate yourself.

Some of the more important items on this list include:

• "Unless an individual purchases an annuity within certain individual retirement accounts (IRAs) no tax deduction is available for any investment made in a tax deferred annuity (excluding qualified annuity arrangements like 403(b) plans)."
• "If the payment is made as a lump sum, income taxes will be due on the difference between the amount paid into that annuity and its value when it is paid back."
• "If the contract is annuitized (the client receives scheduled payouts over a specific period or a lifetime) part of each payment is considered a return of previously taxed principal (i.e., the net investment) and part as earnings. The taxpayer will owe income taxes on the part of the payment that is considered earnings."

Read the entire article at The Annuity Selling Guide's site .