Why are Tax Deferred Annuities Becoming so Popular?

by Hersh Stern - Revised Tuesday, June 11, 2024

According to an Insured Retirement Institute poll, the primary reasons cited by investors for purchasing annuities include guaranteed retirement income, tax deferred growth, principal protection, guaranteed death benefits and advisor referrals. While tax deferral wasn’t at the top of this list, many leading financial experts believe that it will become a top reason moving forward due to rising interest rates, declining defined benefit pension options, and rising federal income tax rates, even during retirement.

For investors currently in higher tax brackets, recent tax law changes have imposed greater taxes on ordinary earned income, itemized deduction phase outs, reduced personal exemption options, qualified dividends, and long-term capital gains. Forecasts suggest additional tax increases in the near and far term.

Today's Best
Multi Year Annuities

Click here for the complete
Deferred Annuity table
Company / Product Rate Yrs.
Equitrust LifeCertainty Select 10 5.60% 10
Pacific GuardianDiamond Head 9 5.50% 9
Equitrust LifeCertainty Select 8 5.50% 8
NassauMYAnnuity 7x 5.80% 7
Oxford LifeMulti-Select 6 5.70% 6
AmericoPlatinum Assure Series 5 5.65% 5
AmericoPlatinum Assure Series 4 5.55% 4
AspidaSynergy Choice 3 5.70% 3
AspidaSynergy Choice 2 5.45% 2

This is a table illustrating today's top interest rates for deferred annuities. The table lists the name of the insurance company, annual effective yield, and the number of years for which the yields are guaranteed. To learn more about deferred annuities click any line in the chart or call 800-872-6684 for quick answers.

Recent budget and economic forecast reports released from the Congressional Budget Office (CBO) point to tax increases across the board for investors over the next decade. While a variety of underlying causes are prompting these increases, one of the most significant is the rising federal deficit. Many financial experts continue to suggest that the federal government will continue to look for ways in which to increase revenues, one of which is to increase federal tax rates.

How can all of this impact an investor’s propensity for selecting non-qualified annuities for a portion of their investment portfolios? Additional non-qualified investment income can result in greater adjusted gross incomes for these same investors. Therefore, products offering tax deferral benefits, such as annuities, will become increasingly attractive. Deferring taxes to a later date, such as retirement, can lessen the financial burden during prime income earning years for a number of investors.

We'd love to hear from you!

Please post your comment or question. It's completely safe – we never publish your email address.

Add a new comment: (Allowed tags: <b><i>)

Comments (2)

  1. Margaret H.
    2014-09-24 22:46:35

    If an annuity is rolled over over to an IRA when does the RMD start

  2. Hersh Stern (ImmediateAnnuities.com)
    2014-09-25 13:25:58

    Hi Margaret-

    You asked: If an annuity is rolled over to an IRA when does the RMD start?

    The answer will depend on the type of IRA annuity you purchased with your IRA funds. If you bought a type of cash value deferred annuity, for example, a multiyear fixed interest annuity, a fixed index annuity, or a variable annuity, then you will need to calculate RMDs based on the cash value of these annuities beginning at age 70-1/2. If however you purchased an immediate income annuity, then RMDs are considered to be satisfied at the time you bought the annuity and you do not need to include that annuity in your RMD calculations. There are many nuances to the RMD rules and I strongly advise you to consult with a CPA or attorney to determine the correct tax treatment in your financial situation.

    Hersh Stern