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Tax Advantages of Annuities


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A Fixed Index Annuity offers Tax Advantages

During the accumulation phase of your contract your fixed index annuity (FIA) offers a tax advantage. Any interest growth is tax-deferred. This is extremely beneficial if you purchase your FIA with after-tax dollars! This means you will only pay ordinary income taxes on your earnings, NOT on your premium payments, when you start to withdraw money. In addition, this tax deferred growth compounds over time and may increase your overall worth of your annuity. This could mean more money for you during retirement!

Let’s talk more about tax deferrals: Traditional IRAs and 401(k)s also allow tax deferrals, but unlike these traditional retirement savings plans, annuities do not have any contribution limits set by the government. Because of this, they may be a great choice for you if you want to save more than an IRA or 401(k) will allow. Plus, you still reap the benefits of the tax deferred growth potential.

Purchasing an annuity within a retirement plan that already provides tax deferral will not result in any 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.

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