Annuities: A savings alternative with tax advantages
Tax-deferred annuities can be an excellent option if you don’t need a source of income right away, are looking for ways to fund your pre-retirement income and want to forgo the immediate impact of taxes.
With a tax-deferred annuity, you’ll eventually have to pay taxes on the money you withdraw. However, as the charts below illustrate, tax-deferred annuities require a much lower interest rate to generate the same return as CD and money market investments.
The following chart can help you determine the effective return of a tax-deferred investment after federal income taxes are paid. For example, if your interest rate is 2.50% and your tax bracket is 25%, then your after-tax return is 1.88%.
Tax-Deferred vs. Taxable Return
Use the following chart to determine the return required from a taxable investment to equal that of a tax-deferred investment. For example, assuming a 25% tax bracket, a taxable investment would have to earn a 3.33% return to match the growth of a 2.50% tax-deferred return.
Hypothetical interest rates used for illustrative purposes only. Not intended to project future incomes. Actual results will vary. Withdrawal and surrender charges may apply. Withdrawals of taxable amounts are subject to income tax and those taken prior to age 59½ may be subject to a 10 percent federal income tax penalty.
Coverage may not be available in all states and may vary by state. Ultra-Secure Plus Policy Form C970LNA09P or state equivalent; (in FL, C971LFL09P; in OR, D136LOR10P). Bonus Flexible Annuity Policy Form D162LNA10P or state equivalent; (in FL, D178LFL10P; in OR, D182LOR10P). Annuities underwritten by United of Omaha Life Insurance Company, 3300 Mutual of Omaha Plaza, Omaha, NE 68175-0001. United of Omaha is not licensed in New York. The information contained herein is not intended to serve as or be a substitute for tax or legaladvice. Consultwith your legal ortax professional before taking any action. This is used as a solicitation of insurance. A licensed insurance agent/producer may contact you.
It’s never too early to start planning for retirement.
Flexible contribution options – An initial deposit of $5,000 or a $1,200 annual commitment is required to open a Bonus Flexible Annuity contract. You can also roll over IRA and Simplified Employee Pension plans to open a Bonus Flexible Annuity contract.
After your initial deposit, you can make additional contributions either monthly, quarterly, semiannually or annually — whatever works best for your needs.
Systematic income options – When you’re ready to begin receiving payments from your Annuity, you can choose if you want to receive payments monthly, quarterly, semiannually or annually. You can also customize the amount of income payments you receive.
Variety of payout options – You also have the flexibility to determine how you want to receive payments from your Bonus Flexible Annuity contract:
- Specified amount
- Lifetime income
- Lump sum