What Is the Benefit Of Tax-Deferred Growth?

One of the benefits of an annuity is the opportunity for your money to grow tax deferred. This means no taxes are paid until you take a withdrawal, so your money can grow at a faster rate than it would in a taxable product.

The following chart shows how a purchase payment of $100,000 grows in a tax-deferred product compared to a taxable product over the course of 20 years. See how the tax-deferred product outgrew the taxable product, even after paying a 20% tax. This increased growth can help you have more income for your retirement years.

Even after paying a 20% tax, the tax-deferred product outgrew the taxable product by more than $25,000.

Tax Deferred Growth Graph

This graph assumes a $100,000 qualified investment, accumulated for 20 years, with a 4% annual growth rate. Lower capital gains and dividend tax rates would make the taxable investment more favorable than the rate illustrated and reduce the difference in performance between these accounts. Consider your current and anticipated tax brackets in making your decision, as they may also impact comparison results. The amount of tax-deferred accumulation would be reduced if early withdrawal charges were reflected. This is a hypothetical scenario for illustration purposes only.

This information is not intended or written to be used as legal or tax advice. It was written solely to provide general information and support the sale of annuity products. You should seek advice on legal or tax questions based on your particular circumstances from an attorney or tax advisor.

For qualified contracts, the full amount withdrawn is generally subject to income tax. For other contracts, only the gains are subject to income tax. If you are under age 59½, the taxable amount is also generally subject to a 10% federal penalty tax.