What is a Tax-deferred Annuity Anyway?

An Annuity is an account with a life insurance company. Under current law, your invested dollars accumulate and compound free from current income and capital gains taxation.

Providing you keep your Annuity in force and do not surrender it, all interest, dividends and capital gains grow tax deferred until withdrawn.

Upon withdrawal or annuitization, (usually at retirement) your earnings are taxed as ordinary income when you are likely to be in a lower tax bracket.

Generally, withdrawals or surrenders prior to age 59-1/2 are subject to a 10% IRS-imposed penalty, plus ordinary income tax.

Tax-free Compounding Allows you to Grow your Nest Egg Faster!

Albert Einstein once said, "the greatest single force in the universe is compound interest." True as that may be, we believe an even greater force would be "tax deferred, compound interest."

Hence, Investors who are seeking growth potential without the constant drag of taxation, "tax deferred, compound interest" may possibly be the most important expression or concept you'll read on this web site.

Tax deferred compounding can make a difference in your retirement planning, especially if you have a time horizon of 10 years or more.

Tax-deferred Earnings

Unlike a taxable investment, the earnings from a tax-deferred investment grow or compound untaxed until withdrawn.

Withdrawals are subject to income taxes when you decide to spend the money, but at least you'll potentially save the 10-39.6% you normally give up while the assets are accumulating. Over a long period of time (10 years or more), this savings can be substantial.

Annuities fall into Four General Categories

Follow for a brief discussion on each below.

 


Action To Take

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Copyright 1998 Fielder Financial Management, LTD.
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Securities offered through Fortune Financial Services, Inc. member FINRA, SIPC.  Fielder Financial Management, Ltd. not affiliated with Fortune Financial Services, Inc.  Mark Fielder, Financial Professional, CA. Insurance Lic. # 0690576.