What Is Tax-Deferred Growth?

Shawn Plummer

CEO, The Annuity Expert

What is tax-deferred growth? This guide will explain how annuities are given favorable tax treatment.

What is Tax Deferral?

Tax deferral means not paying federal income tax now, but in the future when you take withdrawals from your retirement savings account like a 401k, IRA, or annuity.

This also means that you will be earning interest on money that you would otherwise pay taxes on.

Retirement savings grow faster than gains that are taxed each year.

The longer the taxes are deferred, the better, especially if in a lower tax bracket during retirement.

Purchasing an annuity with after-tax dollars, only the annuity interest is subject to ordinary income taxes on your earnings when you begin withdrawing money (not on your premium payments).

Unlike your 401k or IRA, annuities don’t have any government-imposed contribution limits.

Because of that, they can often be a good choice if you want to save more than IRAs and 401(k)s allow and still enjoy tax-deferred growth potential.

Purchasing an annuity within a retirement plan that already provides tax deferral results in no additional tax benefit.

Use an annuity to fund a qualified retirement plan based upon features other than tax deferrals, such as lifetime income options or the guaranteed death benefit.

The Benefits of Tax Deferral

Annuities That Are Tax-Deferred

These annuities are tax-deferred, and you will not have to pay taxes on your earnings until you withdraw from the retirement plan in the future. Annuities …
Read More

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

Scroll to Top