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Taxes and Annuities!

If you participate in a 401(k) plan at your place of employment or if you own an individual Retirement Account (IRA), you're already enjoying the benefits of tax-deferred accumulation. Many annuity products also offer this advantage.

1. So what is tax deferred mean to you?
With a tax-deferred annuity investment, you won't pay any taxes on accumulated funds, dividends or interest until you withdraw the funds. With this in mind the annuity will usually accumulates at a faster rate. This type of tax-deferred funds can provide you a powerful financial advantage.

2. Tax deferral strategies work best when planning your retirement. The reason is the longer funds stay in the annuity, the longer your investment will grow. Keep in mind that you will be taxed on the funds at withdrawl, and at retirement age you will be in a lower tax bracket. You can then be selective in your withdrawals and plan them so that you do not suffer unnecessary tax consequences.

3. Retirement Note: Retired persons may use an annuity to shelter investment earnings that could otherwise lead to a change in Social Security benefits or taxation of Social Security benefits.

4. No-penalty rollovers: Company pension or profit-sharing plan pay outs may be reinvested without incurring taxes or penalties.

5. Tax Warning: Your tax bracket when you retire will more than likely be lower when you begin receiving your annuity income, however, there's no guarantee. Besides that, tax rates may be higher, crippling you with a higher tax bill than you would have paid if had you taken your investment funds before retirement. Find out more with our online quote form.


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