Tax Deferral Helps Your Money Grow Faster
Funding Your Annuity Your annuity can be funded from a variety of income sources. Traditional, non-qualified fixed annuities are typically funded with after-tax savings or income, such as taxable income from employment, proceeds from the sale of a house or assets withdrawn from a taxable brokerage or savings account. However, you may also open an annuity with pre-tax savings or income, including rollovers from qualified retirement plans such as 401(k) or pension plans, by electing an Individual Retirement Annuity. IRA rollovers & transfers All of our fixed annuities can be purchased as Traditional Individual Retirement Annuities with rollover funds from qualified employer plans or rollovers or transfers from existing IRA accounts with other financial institutions. For more information, please consult our IRA Disclosure Statement for a complete explanation of the options and distribution requirements. Roth IRA conversions All of our fixed annuities can be purchased as Roth Individual Retirement Annuities and can be used to convert Traditional IRAs to Roth IRAs. For more information, please consult our Roth IRA Disclosure Statement for a complete explanation of the options and distribution requirements. If you purchase an annuity as a Traditional IRA, or Roth IRA, keep in mind that the annuity offers no additional tax advantages since IRAs already provide tax-deferred status. You should purchase an annuity in an IRA only when one or more of the features of the annuity, such as minimum guarantees, death benefits and life income options, are of value to you. Specific questions about your own personal tax situation should be addressed by a competent tax professional.
The most common type of annuity is a “non-qualified” annuity. Non- qualified annuities are funded with after-tax funds from income that
you’ve already paid taxes on. However, your annuity earnings grow tax-deferred until you begin withdrawing money from your annuity. As a result, the value of your annuity has the potential to grow faster than it would in taxable alternatives, such as CDs or taxable money market accounts earning the same rate of return. By deciding when to withdraw funds from your annuity, you decide when to pay taxes on earnings. Many people plan to pay taxes on their non-qualified annuity earnings during their retirement years, when their income levels and tax rates have the potential to be lower than during their working years. Another type of annuity is known as a “qualified” annuity, because it receives similar tax treatments to qualified retirement plans. With a qualified annuity, your contributions are typically not included as income in the year you make them. Your earnings are allowed to grow tax-deferred over time and you eventually pay taxes on your withdrawals. Qualified annuities are typically purchased by people who are self-employed, own small businesses or are employed by a company of any size and are rolling over their qualified plan balances after terminating their employment.
$300,000 NON-TAX-DEFERRED VS. TAX-DEFERRED ACCUMULATION Growth of $50,000 Lump Sum
$250,000
$200,000
The graph assumes a $50,000 premium, a combined federal and state income tax rate of 34% over a 35 year period and a 5% rate of return. This example is used for illustrative purposes only. The return is not indicative of any specific annuity product and is not a projection of future values. Surrender charges are not taken into account and, if applicable, would reduce the annuity performance shown if they were. Actual results will vary. Withdrawals from an annuity, prior to age 59-1/2, may be subject to a l0% federal penalty tax. A surrender charge will apply when withdrawals exceed 10% of the penalty-free amount and are made during the surrender charge period. Actual returns will vary depending on your specific tax rate (which may be more or less than the figures shown). A lower tax rate on capital gains and dividends would increase the growth rate of the non-tax-deferred account. In evaluating the purchase of an annuity, you should consider your investment time horizon and tax brackets, both current and anticipated. Please note that by liquidating current taxable holdings, you may be subject to capital gains or losses, which could impact your tax liability. Additionally, tax-deferred performance will be reduced by income taxes on gains upon withdrawal.
$150,000
$100,000
$50,000
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n Annuity Value n Annuity Value After Tax n Non-Tax-Deferred
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