Tax Deferred Growth with an Annuity

Paying taxes on interest earnings has to be one of the more painful parts of investing. It’s unfortunate that you have to pay taxes on interest earnings accumulated inside a savings account or certificate of deposit. Every year, that pesky 1099 form shows up in the mailbox requiring you to report your interest earnings on your income tax return. On top of a small interest rate, the taxes you pay result in an even smaller profit. Why not consider laying aside some of your money in a tax deferred annuity?

When you invest a lump sum in a deferred fixed annuity, your money earns interest - either a fixed rate of interest or interest earnings tied to a stock market index. At the same time, these interest earnings are exempt from taxation until you annuitize the contract or begin taking withdrawals. This way money that you’d normally use to pay taxes on your gains stays in the annuity, continuing to compound further.

Individuals receiving Social Security benefits that are looking to reduce taxation on their income should also consider moving a portion of their non-Social Security investment income into a deferred annuity. Because interest earnings are tax deferred until withdrawn, they will not be counted as income for federal tax purposes and may result in you paying less taxes on Social Security income for a particular year.

Taxes are a part of life, and you will be responsible for paying state and federal income taxes when you annuitize, or begin to receive payments from the annuity. But with an annuity, you get to choose when to pay these taxes. Also, because many people are in a lower tax bracket when they begin receiving payout from their annuities, their tax savings are twofold.

To learn more about deferring taxes with an annuity, call our Annuity Specialists at 1-888-837-4226.