Page 30 - DON'T MAKE ME SAY I TOLD YOU SO - ANNUITY CHAPTER ONLY
P. 30
Section 9
tax treatment of Variable annuities
Variable annuities are often viewed as an investment that can offer
significant tax savings by deferring income taxes on the investment
profit. That is, you invest “after-tax money” and pay no taxes
on the investment interest, dividends, or capital gains until you
take withdrawals. They also allow you to switch money between
investments in the annuity without creating a taxable event.
The tax deferral feature of an annuity, however, may not be
quite as advantageous as it seems at first glance. Let’s look at
how variable annuities are taxed, and how using after-tax money
to invest in a variable annuity may cause you or your heirs to pay
more tax, compared to other investment options.
No Long-Term Capital Gains Treatment
While the tax deferral feature may be beneficial during
accumulation, it becomes far less advantageous when you begin
to take money out of the variable annuity. At the time you take
withdrawals, there are two drawbacks:
Chapter 4: Annuities
Don't Make Me Say I Told You So_6.27x9.46.indd 186 09-07-2016 00:22:13
