THE POWER OF TAX-DEFERRAL
Tax-deferred growth allows your money to grow faster because you earn interest on dollars that would otherwise be immediately taxable. Paying taxes on gains each year will reduce the amount of funds available for growth and compounding. With a Tax-Deferred annuity your earnings will accumulate on both your principal and interest which results in greater value buildup over time. Income taxes are deferred until funds are withdrawn from the contract. The chart below shows the taxable yield needed to be equivalent to the tax deferred yield, otherwise known as the Tax Equivalent Yield. In this example, an initial premium is shown growing over a 20-year period using a 3.00% interest rate. This compares the difference in growth of a tax-deferred growth to a taxable growth, assuming no withdrawals are taken. Paying taxes on gains each year will reduce the amount of funds available for growth and compounding. With a Tax-Deferred investment your earnings will accumulate on both your principal and interest which results in greater accumulation over time.
This chart is for illustrative purposes only. It is not an indication of performance of any specific product or investment.
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