Tax Deferral

Tax Deferral

Posted: June 16, 2015 at 3:27 pm by Skip Kelley

A Fixed Index Annuity Offers Tax Advantages

During the accumulation phase of your contract, any interest growth is tax-deferred. If you purchase your fixed index annuity with after-tax dollars, you will only pay ordinary income taxes on your earnings – not on your premium payments – when you begin withdrawing money. Tax-deferred growth, compounded over time, may increase the amount of savings and income your fixed index annuity generates for your retirement.

Tax deferral is also a benefit of traditional IRAs and 401(k)s. However, annuities don’t have any government-imposed contribution limits. Because of that, they can often be a good choice if you want to save more than IRAs and 401(k)s allow and still enjoy tax-deferred growth potential.

Purchasing an annuity within a retirement plan that already provides tax deferral results in no additional tax benefit. So use an annuity to fund a qualified plan based upon features other than tax deferral, such as lifetime income options or the guaranteed death benefit.

Tax-deferred growth, which can compound over time, may increase the amount of savings and income your fixed index annuity generates for your retirement.

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