A Fixed Tax-deferred annuity, also referred to as a tax-deferred annuity, is a contract between you and an insurance company for a guaranteed interest bearing policy with guaranteed income options. The insurance company credits interest, and you don't pay taxes on the earnings until you make a withdrawal or begin receiving an annuity income. Your annuity contract earns a competitive return that is very safe.

Tax-Deferred?

Tax-deferred means postponing your taxes on interest earnings until a future point in time. In the meantime you earn interest on the money you're not paying in taxes. You can accumulate more money over a shorter period of time, which ultimately will provide you with a greater income.

Many people today are using tax-deferred annuities as the foundation of their overall financial plan instead of certificates of deposit or savings accounts. Although CD's and Annuities are very similar there are significant differences between the two. The most important difference is that annuities allow for the deferral of the taxes due on the interest earned until the interest is withdrawal! By postponing the that tax width a tax-deferred annuity, your money compounds faster because you can earn interest on dollars that would have otherwise been paid to the IRS. Later, if you decide to take a monthly income, your taxes can be less because they will be spread out over a period of years. Like Certificates of Deposits, annuities have a penalty for early surrender, however most annuity contracts have a liberal "free withdrawal" provision.

Tax Advantages

You pay NO taxes while your money is compounding. You can also pay a lower tax on random withdrawals because you control the tax year in which the withdrawals are made, and only pay taxes on the interest withdrawn, Tax deferral gives you control over an important expense - your taxes. Any time you control an expense, you can minimize it. The longer you can postpone this particular expense, the greater your gain when compared to the gain you would make with a fully taxable account.

To illustrate the increased earnings capacity of tax-deferred interest, compare it to a fully-taxable earnings. $25,000 at 6.0% will earn $1,500 of interest in a year. A 28% tax bracket means that approximately $420 of those earnings will be lost in taxes, leaving only $1,080 to compound the next year. If these same earnings were taxdeferred, the full $1,500 would be available to earn even more interest. The longer you can postpone taxes, the greater the gain.

• Aviva Expands Bank Product Portfolio with Multi-Rate Deferred Annuity - Insurance News Net - QUINCY, Mass., Aug. 21 /PRNewswire/ -- Aviva Life Insurance Company (Aviva) recently launched Saver's Select, a multi-rate flexible premium deferred annuity designed for financial institution sales. The addition of Saver's Select fortifies Aviva's ...
• Learn About Annuities - WHO-TV - An annuity is a contract between you (the purchaser, or owner) and an insurance company. In its simplest form, you pay money to an annuity issuer, allocate your money to either fixed or variable investment options, and then the issuer pays out ...
• Insurance firm investigated for Delaware mailings - Delaware Online - State Insurance Commissioner Matt Denn said today he’s investigating an Ohio firm over what appear to be misleading mailings to Delaware consumers. Denn said the firm, Investors Union LLC of Medina, Ohio, doing business as the “Annuity Service ...
• Vista Enterprise Meant To Spark Microsoft Licensing - TechWeb - Microsoft's decision to offer important enterprise features in the upcoming Windows Vista only to companies that buy into annuity licensing programs could boost revenues, a Gartner analyst told TechWeb Tuesday. "But it's a heavy-handed way to get ...
• Ask basic questions in planning for retirement - Philadelphia Enquirer - I have never met with anyone who owned an annuity who understood what they were invested in, why they were invested in it and what fees they were paying. After learning about their annuity's features and fees, most people are upset. If annuities were ...
• Genworth Financial Awards $3 Million Prize to 'Geniuses' - MSN MoneyCentral - Each winning team member may elect to receive $1 million, delivered as an annuity provided by Genworth Life Insurance Company. Or they can take a cash award, based on the present value of the annuity. Because income payments from an annuity are ...
• The Pomerantz Firm Charges Scottish Re Group Ltd. With Securities - MSN MoneyCentral - Scottish Re is a Cayman Islands corporation that engages in the reinsurance of life insurance, annuities and annuity-type products. The Complaint alleges that that in 2003 and 2004, the Company acquired the "book of business" of ING's annuity ...
• Fitch Downgrades Scottish Re's Ratings; Remain on Watch Negative - Insurance News Net - ... liquidity, without concessions from its bank group, to fund the repayment of the $115 million in convertible notes in December 2006. Since Fitch's most recent rating action on Aug. 1, 2006, SCT's primary operating subsidiary, Scottish Annuity & Life ...
• Giving to charities has wide payoff - Desert Sun - For example, assume a couple ages 65 and 64 set up a Charitable Annuity Trust in the amount of $200,000. Charitable deduction An annuity trust means they will get a fixed amount of income for the rest of their lives. The provisions of the trust provide ...
• Board extends WSCC president's contract with raise - Ludington Daily News - Overall, his compensation package grew by $9,000 to $135,905, thanks to a 6.6 percent raise in his base salary to $120,905 and a 17.6 percent, or $1,500, raise in his annuity to $10,000. Dillon also has a $5,000 “officeholder” fund to use ...