The Advantage of Tax Deferral

When you evaluate the effect of taxes together with inflation, you'll recognize the need to make the most of your investment dollar. A sensible approach is to defer taxes during your high-income years and to pay them when you may be in a lower tax bracket. Because you control when you pay taxes, you end up keeping more of what you earn. (Distributions may be subject to income tax and, if made prior to age 59 1/2, may also be subject to a 10% IRS tax penalty.)

Your Money Grows Faster
One of the many great advantages of a tax-deferred fixed rate annuity is that the interest earned on your annuity is tax-deferred, which means your money grows faster than a similarly yielding taxable alternative. Tax-deferred investing can therefore result in a larger nest egg when you are ready to receive income, simply because 100 percent of your investment and its earnings go to work for you.

What This Means for You

• You earn interest on your principal
• You earn interest on your interest
• You earn interest on money you would have otherwise paid in taxes

Hypothetical Illustration Initial investment of $10,000 at an annual rate of 6% This graph assumes a 6% growth rate and federal tax rate 27.5%. Withdrawals of tax-deferred accumulation are subject to income tax including a 10% federal tax prior to age 59 1/2. This graph does not reflect the deferred surrender charge declining from 6% to 0% over 5 years. The initial impact of tax-deferred accumulation would be reduced if the charges were reflected. The assumed growth rate is for illustration purposes only and does not represent the return rate of any specific investment.

Content is for informational purposes only and may not accurately reflect your specific situation. Information is not intended to provide financial, legal, tax, or accounting advice. You should consult a qualified advisor for advice specific to your own circumstances.