Tax deferral to earn more Accumulation 7 is tax-deferred 1 , so you don’t pay taxes on interest earned within the account until a withdrawal is made. Because you’re not paying taxes on the earnings each year, your assets have the potential to continue to grow and benefit from the power of compounded growth, so you get a triple benefit of tax-deferral: 1. Earn interest on your accumulation value. 2. Earn interest on your interest. 3. Earn interest on money not paid in taxes. See the difference For example, take a woman whose age 55 and in the 24% tax bracket with $100,000 to invest. She doesn’t plan on withdrawing the money unless something unexpected comes up, so she wants to compare how each account performs over 30 years. She’s looking at two options, one that’s tax-deferred (taxes are paid on the entire amount when it’s withdrawn) and one that’s taxable (taxes are paid every year on the earnings). Assume that both options earn 5% interest. At the end of 30 years, the tax-deferred investment is worth over $125,000 more than the taxable investment. Even after taxes are paid when the money is withdrawn from the tax-deferred account, it’s still worth over $20,000 more.
$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000
$432,194
$328,468
$306,140
Tax-deferred investment After-tax balance on lump sum withdrawal of tax-deferred investment Taxable Investment
In this example, if the investment is part of an IRA or other qualified plan, the after-tax balance on a lump sum withdrawal would be $324,146, because the entire amount would be taxable when withdrawn. If withdrawals are taken prior to age 59½, tax penalties may apply. Consult an attorney or tax professional. This hypothetical illustration is not intended to reflect the return on the Ameritas Accumulation 7 Index Annuity. The figures are calculated on a fixed interest rate. Tax-deferred returns shown do not reflect applicable surrender charges or market value adjustment. Assumed rate of 5% is not an estimate or guarantee of future rate. Actual results may vary.
1 Withdrawals of policy earnings are taxable and, if taken prior to age 59½, a 10% penalty tax may also apply. The information presented here is not intended as tax or other legal advice. For application of this information to your specific situation, you should consult an attorney.
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