Are You Tax Savvy?
If you're like most Americans, taxes take a pretty big bite out of your take-home pay. And for many, the costs keep rising on multiple fronts:
In a rising tax environment, it may make sense to take a fresh look at your retirement savings and investment strategies to help make sure you're being tax savvy.
If you're not already enrolled in your employer's plan, take a look at the chart below to see how powerful tax deferral can be over time. With tax deferral, money that might otherwise go to pay current taxes remains invested for greater long-term growth potential. How much of a difference could that make over the long run?2
Chart showing the Power of a Tax Deferral. Tax deferred income $386,968 vs $267,359.
If you're enrolled in an employer-sponsored retirement plan or account - or other tax-deferred savings and investment strategy - you won't have to deal with these concerns since all interest, dividends and capital gains accumulate free of current taxes and are taxed as ordinary income when withdrawn. Keep in mind, capital gains and dividends within a taxable investment may be taxed at a rate that is lower than tax rates on ordinary income.
If you're not already taking advantage of these tax savvy strategies, don't delay -start building your financial independence plan today!
1Annuities are long-term products designed for retirement. Early withdrawals may be subject to withdrawal charges. Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59 ½, an additional 10% federal tax may apply. An investment in a variable annuity involves investment risk, including possible loss of principal. The contract, when redeemed, may be worth more or less than the total amount invested. Retirement plans and accounts, such as an IRA, 401(k) or 403(b), etc. can be tax-deferred regardless of whether or not they are funded with an annuity. The purchase of an annuity within a retirement plan or account does not provide additional tax-deferred treatment of earnings. However, annuities do provide other features and benefits that may be important to you, including options for guaranteed lifetime income and a guaranteed death benefit for your beneficiary.
2The tax deferral illustration is hypothetical and is intended solely to demonstrate the comparative effect of compounding on tax-deferred vs. taxable investments. It does not reflect the actual return of any product or its investment options, nor does it reflect any withdrawal charges, insurance charges, contract administration charges or portfolio operating expenses associated with a tax-deferred or taxable investment. Such expenses would lower returns. Lower maximum capital gains rates may apply to certain investments in a taxable account (subject to IRS limitations, capital losses may also be deducted against capital gains), which would reduce the difference between the performance in the accounts shown in the char. You should consider your personal investment horizon and current and anticipated income tax brackets when making investment decisions as they may further impact the results of the comparison.
Securities and investment advisory services offered through VALIC Financial Advisors, Inc., member FINRA, SIPC and an SEC-registered investment advisor.
Annuities issued by The Variable Annuity Life Insurance Company. Variable annuities distributed by its affiliate, AIG Capital Services, Inc., member FINRA.
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