The Annuity
An annuity is a contract issued by an insurance company and usually referred to as an fixed annuity policy or annuity contract. What makes annuities different is the tax treatment given them by the IRS. Think of an annuity as an umbrella. When money is placed under the umbrella or annuity contract, it is protected from taxes. The money that would have been paid in taxes now remains in the annuity to grow.
The money that you put in an annuity is referred to as a premium, it’s your original contribution or principal contribution. Since you already have paid taxes on it, it never again will be subject to taxation. This assumes that you haven’t purchased an annuity as part of a qualified retirement program such as an IRA, 401(k), TSA or 457 plan.
The money that you put into an annuity will earn interest or receive dividend income or capital gain distributions. These “earnings”, unlike money in a savings account, mutual fund, certificate of deposit are not taxed in the year in which they are earned. Thus the “earnings” will continue to grow and compound tax free until withdrawn.
Just in case you have a CD renewing soon...you may want to see how a tax deferred annuity could really help your "Bottom Line" with
interest rates that are guaranteed, tax deferral... and other benefits. Call us for more information. (800) 601-5433
Savings Advantages
Many people today are using tax-deferred annuities as the foundation of their overall financial plan instead of certificates of deposit or savings accounts. Although CD's and Annuities are very similar there are significant differences between the two. The most important difference is that annuities allow for the deferral of the taxes due on the interest earned until the interest is withdrawal! By postponing the that tax width a tax-deferred annuity, your money compounds faster because you can earn interest on dollars that would have otherwise been paid to the IRS.
Later, if you decide to take a monthly income, your taxes can be less because they will be spread out over a period of years. Like Certificates of Deposits, annuities have a penalty for early surrender, however most annuity contracts have a liberal "free withdrawal" provision.
Tax Advantages
You pay NO taxes while your money is compounding. You can also pay a lower tax on random withdrawals because you control the tax year in which the withdrawals are made, and only pay taxes on the interest withdrawn.
Tax deferral gives you control over an important expense - your taxes. Any time you control an expense, you can minimize it. The longer you can postpone this particular expense, the greater your gain when compared to the gain you would make with a fully taxable account.
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For more annuity Information Call: Louis Hammond
(800) 601-5433
