Taxable vs.

Tax-deferred

Compare a hypothetical investment of $50,000 in both a taxable vehicle and a variable annuity, each accumulating at 9% per year*. At the end of 25 years, assuming a combined federal and state tax rate of 41%, the taxable investment would be worth $182,267. However, the variable annuity would be worth $312,088. That's an extra $129,821 in your variable annuity account.  Even if you take a lump sum distribution and paid taxes, it would still be worth $204,632. 

* This example assumes that the distribution is requested at or after age 59 1/2. There may be a 10% IRS penalty for surrenders made before age 59 1/2. Gains from tax-deferred annuities are taxable as income upon surrender. The earnings rate used for the taxable investment assumes no charges and expenses. The earnings rate used for the tax-deferred investment assumes the application of a $30-per-year contract fee and a 1.4% annual insurance fee, covering administration, mortality, and expense risk.

This example is for hypothetical purposes and is not intended to represent the performance of any particular annuity product. The dollar returns in this example do not reflect the effects of the fees and charges and, if they had, the returns would have been lower.

If you don't need the money in a lump sum, the advantages are even greater because the assets left in a variable annuity continue to accumulate on a tax-deferred basis or take a monthly retirement income using systematic withdrawals.  Remember you only pay taxes on distributions taken out of your variable annuity, so why take it all out at once.  It doesn't make sense to do that unless of course you have to have all of your money at once.

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Last modified: May 01, 2008