What about Deferred Taxation?


An annuity policy can grow, tax-deferred. Until you take money out, there is no taxable event. Therefore, no immediate taxes incur. Instead the taxes on retirement income come later, when you withdraw your money.


The good news: this allows your money to grow with compound interest more quickly. At the time of income payment, you pay tax on the amount you take.

This method of deferring taxation with an annuity can help in other ways as well. For example, if you have social security benefits. The amount you receive from social security will take your income into account. So, any income from a job, or interest from CDs, bonds, or other investments will count as income. In some situations, this additional income might cause social security benefits to decrease. Or, if the income is too high, you may lose the benefit for that year entirely. However, with an annuity, the interest growth do not count as income. Therefore, any earnings in your annuity contract do not affect your social security benefits.

IRA , 401(k), and FIA

You can defer taxes with a traditional IRA and 401(k), too. However, FIAs may offer more. For instance, FIAs do not cap how much you can put into them. However, these other accounts do. So, if you can not put any more money into your IRA or 401(k), and FIA may help. Annuities, in general, can offer another way to save money for the long-term.


In addition, roll-overs may be possible with a Roth IRA into an FIA. In this way, you can defer taxes on your retirement  money. Of course, tax issues may vary from person to person. So, seek guidance from a tax professional.

In addition, you may contact us at Orfin and Associates to help you learn your retirement options.

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Taxes on Retirement Income Withdrawal

When you purchase a fixed index annuity (FIA) with after-tax income, there are benefits. First, let’s look at the two phases of an annuity. Phase 1 is accumulation. Phase 2 is pay-out. In the first phase, an FIA has an advantage, tax-wise. Specifically, it grows without taxation. Put another way, you do not pay income tax on premium payments. So, no taxes are due until you withdraw income. At that time, you simply pay ordinary income tax on your earnings.


Less money for taxes, more money for retirement.

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Retiring Early? Read This.

FIAs might be another options for those retirees early as well. However, some key criteria must be met. Can you check “yes” to all 3 of these conditions? Then, contact our office to find out if an FIA could save you money in taxes.

  1. Are you under the age of 59 1/2?
  2. Did you receive big lump sum payment from your 401(k) profit sharing plan?
  3. Was the lump sum payment part of a severance package or early retirement package?

If you said “yes” to all 3 of these questions, you might benefit from learning about an FIA.

It’s possible that a roll over could help avoid a big tax bill in this situation. That’s because, typically, a person would have a penalty for taking this money too young. But, if a “Substantially Equal Periodic Payment” (SEPP) program is set up, you might be able to take funds from the accounts. As you can see, this would possibly free up money you thought was not available until retirement age.

Contact us today to learn about your retirement options and discuss possible tax implications.

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