Why are Tax Deferred Annuities Becoming so Popular?
by Hersh Stern - Revised Saturday, September 16, 2023
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.
Deferred Annuity table
|Company / Product||Rate||Yrs.|
|Equitrust LifeCertainty Select 10||6.00%||10|
|Oxford LifeMulti-Select 9||5.35%||9|
|Equitrust LifeCertainty Select 8||5.70%||8|
|AmericoPlatinum Assure Series 7||5.60%||7|
|Equitrust LifeCertainty Select 6||5.65%||6|
|AmericoPlatinum Assure Series 4||5.45%||4|
|Sentinel Security LifePersonal Choice Annuity 3||5.60%||3|
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.