The force of tax deferral that is!
In its simplest form, an annuity is a retirement vehicle – 1) it’s a solution to grow money tax favorably and 2) it’s an opportunity to create guaranteed lifetime income.
We’re all keenly aware of the lifetime aspect of annuities – and for good reason, it’s the feature that garners most of the attention. However, let’s take a look at the “growing money tax favorably” aspect – a feature worth noting.
In a traditional taxable account, individuals are required to pay taxes on interest, income, dividends, and capital gains each year – taxes must be paid FIRST, before they can continue to grow their money. But annuities, similar to IRAs, have the power of tax deferral. Meaning they harness the ability to increase growth WITHOUT the taxable event – taxes are deferred until income is taken in retirement.
So, if money is earmarked for retirement, how much is a client saving in taxes?
Let’s put it in perspective: Your 40-year-old client is committed to save for retirement. They received $100k from an inheritance and through your planning has decided to set it aside. They fall within the 28% income tax bracket and believe they’ll work until age 70. Also, let’s assume a reasonable 5% annualized return over that 30-year period.
With a traditional taxable account, the future value of that portfolio would be worth $288,930 – not bad. But with the tax-deferred annuity, the future value of the portfolio is $432,194! With a difference of over $143k, there’s a clear winner here.
Use this TAX DEFERRAL CALCULATOR to show your clients what this means for them and how you can help them leverage an annuity that help grow their money tax favorably.
Get started – contact your Annuity Sales & Marketing Associate today.
CPS Insurance Services
4400 MacArthur Blvd, 8th Floor
Newport Beach, California 92660
Main Phone: (949) 863-0700
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