The Power of a Tax-Deferred Annuity
A tax-deferred annuity is a contract between you and the insurance company with guaranteed interest and guaranteed annuity income options.
The table of values and chart above assume no withdrawals. Withdrawing interest from the tax-deferred column will produce identical results to the taxable column. All values are hypothetical examples.
Advantages of a Tax-Deferred Annuity
Tax Deferral: One of the primary advantages of deferred annuities is the opportunity to accumulate a substantial sum of money by allowing your premium and interest to grow tax-deferred. Unlike taxable investments, you pay no taxes on your annuity interest until you begin to take withdrawals or receive income. This allows your money to grow faster than in a taxable account, because you earn interest on the money that would have otherwise been paid in taxes.
Stability: Your tax-deferred annuity is stable. Your state insurance department laws require that insurers maintain reserves equal to the cash surrender value of your annuity contract at all times. In addition, state laws require they maintain additional amounts of capital and surplus for further contract owner protection.
Liquidity: Your annuity provides you with opportunities to withdraw funds penalty free after the first contract anniversary. Some deferred annuities offer penalty free access as soon as 30 days after the policy is issued.
May Avoid Probate: In the case of premature death, your beneficiaries have the value within your annuity available to them. A properly designated beneficiary may avoid the expense, delay and publicity of probate. Your named beneficiaries can choose to receive the proceeds as monthly income or a lump sum payment.
Guaranteed Income: A deferred annuity can also provide you with a guaranteed income. You have the ability to choose from several different income options, including payments for a specified number of years or income for life, no matter how long you live. With non-qualified plans, a portion of each income payment represents return of premium which is not taxed, thereby reducing your tax liability from your income payments.
Withdrawals prior to age 591/2 may be subject to IRS Penalties. This information is not tax advise. It is a summary of our understanding of current tax laws as they relate to insurance products. Consult your tax advisor on specific points that may affect you.
What about Social Security?
Did you know as much as 85% of Social Security benefits could be subject to income tax?
| Filing Status | Provisional Income Levels | ||
| Single Taxpayer | $25,000 to $34,000.00 | Over$34,000.00 | |
| Married, filing Jointly | $32,000 to $44,000.00 | Over$44,000.00 | |
| Social Security Benefit Subject to Tax | 50% | 85% | |
Your Provisional Income ultimately decides how much of your social security is taxed. Provisional Income includes the total of normal earned income like interest from CD's as well as one-half of the Social Security benefits you receive and even tax-exempt income such as interest from tax-free municipal bonds.
One type of income that is not included in the Provisional Income calculation is tax-deferred income. Seldom has the special benefit of tax-deferral been more important to you as a tool to minimize your tax bill. By putting some of your assets into tax-deferred annuities and leaving the interest to compound tax-deferred, you can control your income flow to meet your own needs, without receiving unneeded dollars which only increase your tax bracket.
With Tax-Deferred Annuities you can…
- Earn Interest without paying current taxes on it, until withdrawn
- Earn more interest on the interest, thus compounding your asset growth, and giving you even more income potential later if you need.
- Reduce your tax liability on your hard-earned retirement income!
In addition, Tax-Deferred Annuities Offer…
- Competitive interest rates
- No risk to premium, due to index volatility
- Multiple liquidity options, if needed
Would additional tax-deferred interest benefits reduce your taxes and increase your disposable income? Consider your options and take advantage of the opportunities annuities make available to you . Tax-deferred annuities are one of the best opportunities you have!
Note: This information is not intended to be a detailed description of the effect of taxes on Social Security benefits. Deferred annuities contain certain restrictions and/or IRS penalties related to premature distributions. Please consult with your tax advisor to determine the actual impact on your specific situation.