Many people today are using tax-deferred annuities as the cornerstone of their overall financial plan instead of other financial instruments. An annuity is a contract that has unique and valuable features. Chief among them is that the annuity offers income tax deferral until the money is withdrawn. This allows the annuity value to increase at a faster rate than investments that are currently taxed. ¹

The example below illustrates the increased earnings capacity of tax-deferred interest, compared to fully taxable earnings.

	Annuity	Taxable Investment
Investment	$ 50,000	$ 50,000
Projected Earnings at 5%	$ 2,500	$ 2,500
Assumed Current Income Tax = 28% bracket	$ 0	$ 700
Net after-tax earnings	$ 2,500	$ 1,800
After-tax value of investment	$ 52,500	$ 51,800

With the annuity the full $2,500 of earnings would be available to compound and earn even more interest. The longer you can postpone taxes, the greater the gain.

¹ Under current tax law, earnings withdrawn before age 59 1/2 may be subject to IRS penalty.

Income and growth on accumulated cash values have been held by the Tax Court to be generally taxable only on withdrawal. Consult your tax advisor or attorney on your specific situation