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Annuity Introduction | Annuity Types | CD versus Annuity | Annuity Quote | Glossary | Links|
BANK CD versus ANNUITY
Individuals in a 31% tax bracket can increase the growth on their bank deposits by 45% with tax-deferred annuities. Here is how it works:
If your bank account earns $1000 in annual interest income, shortly after year's end, you'll receive a 1099 for $1000 to report on your tax return. This means you'll owe Uncle Sam $310. That $310 equals 31% of what you earned, but it equals 45% of the amount you get to keep.
By transferring your savings to an annuity, you eliminate the 1099 and get to keep that $310 in interest to compound tax-deferred. It's like borrowing from Uncle Sam at 0%.
Comparison of Annuities with Certificates of Deposit
|
Features |
Annuity |
CD |
|
1. Free from principal/market risk and price fluctuations? |
Y |
Y |
|
2. Are interest earnings free from current taxation? |
Y |
N |
|
3. Are interest earnings reinvested automatically with no current income taxation? |
Y |
N |
|
4. Am I able to make small additional investments? |
Y (1) |
N |
|
5. Tax liability on Social Security income eliminated on deferred accumulation? |
Y |
N |
|
6. Liquid? |
Y |
Y |
|
7. Flexible? |
Y |
Y |
|
8. Penalty free withdrawal? |
Y |
N |
|
9. Funds not reduced by commissions? |
Y |
Y |
| 10. Does this investment automatically avoid the expense and delay of probate? |
Y |
N |
|
11. Guaranteed lifetime income with tax advantages? |
Y |
N |
|
Totals |
11 |
4 |
|
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(1)When your Tax-Deferred Annuity is a Flexible Deferred Annuity versus a Single Premium Deferred Annuity; small additional deposits are allowed.
The material presented on our web site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice, you may wish to consult a competent attorney, tax advisor, or accountant.
Note: Any reference to the word guarantee is based on the claims paying ability of the underlying insurance company.
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