Tax Deferred Annuities

Tax Deferred Annuities are instruments issued by life insurance companies. The underlying investments can emulate any type of alternative investment you may be considering. For example, fixed Annuities will normally be available that pay a rate that is guaranteed and higher than comparable Certificates of Deposit issued by banks. If your style of investment is equity based, then Variable Annuities* can be found that offer a wide variety of investment choices that cover virtually every asset class.

The major reason for using an annuity is that it defers taxation of gain until the funds are withdrawn. If your tax bracket is such that you would prefer not to pay any income tax on earnings until you take out the money, then the use of an annuity may be for you.

If you are in the 33% tax bracket and about to invest $10,000, here are some basic comparisons as to the results you can get using an annuity:

Assumed Earnings Rate: 6% 12%

Accumulation:	Taxable	Tax Deferred	Taxable	Tax Deferred
5 Years	12,167	13,382	14,693	17,623
10 Years	14,802	17,908	21,589	31,058
15 Years	18,009	23,966	31,722	54.736
20 Years	21,911	32,071	46,610	96,463

When you begin to take earnings, you will receive taxable income from either the Taxable or Tax Deferred account. The advantage of the annuity is that it will have a larger sum from which to draw this income. In other words, 6% of $32,000 will create more income than 6% of $21,900. In like manner, 12% of $96,000 will pay you more than 12% of $46,600.

Just as with Certificates of Deposits and back-end loaded Mutual Funds, annuities will have surrender charges for early withdrawal. These charges will go away over a period of five to ten years, depending upon the annuity. Most annuities, however, will permit annual withdrawals of up to 10% of the account without any surrender charge.

We offer a large variety of Fixed Annuities offering attractive interest rates as well as Variable Annuities with a broad list of attractive mutual fund type investments. For complete information, contact us at info@vbscorp.com or call us at 1-888-PLAN AHEAD.

*VBS is NOT a securities dealer. VBS has representatives who are registered with member firms of FINRA through whom all securities are offered.