Along with a competitive fixed interest rate, fixed annuities can help provide peace of mind with tax-deferred growth.
With a tax-deferred annuity, your money can grow faster than it would with other financial products. Earnings on a financial product are considered part of your annual income, and are therefore taxed. With an annuity, earnings stay in your contract and are not taxed until you make a
withdrawal. Over time, you will earn interest on your interest and compound your earnings.
The result: The tax deferral and compound interest of an annuity help maximize your savings.
Also see the tax benefits: qualified vs. nonqualified
This hypothetical illustration compares taxed and tax-deferred growth of $100,000 earning an annual effective interest rate of 5% for an individual in a 28% tax bracket. It is for illustration purposes only and is not intended to represent any particular investment.
Tax-deferred accumulations are taxed as ordinary income at withdrawal. It is possible that the contract holder may be in a lower tax bracket at the time the funds are withdrawn. A 10% federal tax penalty may also apply to amounts withdrawn prior to age 59½.
Calculate your potential tax-deferred savings
*Accumulations in a tax-deferred retirement plan are usually for retirement purposes and are not withdrawn in one lump sum. For comparison purposes, this illustration shows the taxes that would be paid on a lump sum withdrawal after 30 years, given the same tax bracket. Individuals also have the option to spread their withdrawals and tax liability over a number of years.
