Albert Einstein once stated that “compound interest is the eight wonder of the world.” With a fixed annuity you receive triple compounding interest on the principal, interest on the interest, and interest on the tax deferred earnings. This triple compounding through tax deferred allows your money to grow faster than it would in a certificate of deposit or other taxable investment.
Let’s assume you are investing $100,000 for 5 years and your growth is 3.5% per year. If this account grows tax deferred in an annuity, the account would grow to $118,543. If this same $100,000 grew at 3.5% in a taxable account, the account value after 5 years would be $112,480. This assumes a tax rate of 32%.
Taxes can have a major impact on your retirement income. It is very important to do tax planning so that you control when and how much tax you will pay. IF you are interested in the benefits of tax deferred annuities, please contact our office for more information.
Investment advisory services offered through Virtue Capital Management, LLC (VCM), an investment adviser registered with the U.S. Securities and Exchange Commission. VCM and BW Wealth Management are independent of each other. Insurance and annuity products are not sold through Virtue Capital Management, LLC (VCM). VCM does not endorse any annuity or insurance products nor does it guarantee any annuity or insurance products performance. Any guarantees mentioned are backed by the financial strength and claims paying ability of the issuing insurance company and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Index or fixed annuities are not designed for short term investments and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer. Information provided is not intended as tax or legal advice and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional.
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