Taxes can have a big impact on long-term investment returns. While the S&P 500 Index had an average annual return of 10.4% from 1926 through 2007, the after-tax return was 8.2%.* Like most investors, you’re probably familiar with the benefits of investing tax-deferred through IRAs and 401(k) plans, but did you know that variable annuities can also offer tax advantages when investing for retirement?
Variable annuities can help your money work harder for you with tax deferral
With a tax deferred investment like a variable annuity, your earnings are only taxed when you withdraw them. That means every dollar of your investment can work harder for you, helping to generate potentially more earnings over time. And that can mean greater spending power at retirement.
When you invest for retirement through a variable annuity, you can benefit from five tax advantages. Keep in mind however, that tax deferral is a benefit that the Internal Revenue Service (IRS) extends to encourage long-term savings. If you make a withdrawal before age 59½, a 10% federal tax penalty may apply.
Annuities are designed for long-term retirement investing. Early withdrawals may be subject to withdrawal charges. Partial withdrawals may reduce benefits available under the contract, as well as the amount available upon a full surrender. Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59½, 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. Tax-qualified plans, such as an IRA, 401(k), etc., are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity.
Variable annuities are sold by prospectus only. The prospectus contains the investment objectives, risks, fees, charges, expenses and other information regarding the contract and underlying funds, which should be considered carefully before investing. A prospectus may be obtained from your financial advisor or by calling 1-800-445-7862. Please read the prospectus carefully before investing.
This material was prepared to support the marketing of the SunAmerica Variable Annuities. Please keep in mind that American General Life Insurance Company (American General Life), SunAmerica, and their distributors and representatives may not give tax, accounting or legal advice. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. Such discussions generally are based upon the company’s understanding of current tax rules and interpretations. Tax laws are subject to legislative modification, and while many such modifications will have only a prospective application, it is important to recognize that a change could have retroactive effect as well. Please seek the advice of an independent tax advisor or attorney for more complete information concerning your particular circumstances and any tax statements made in this material.
Variable annuities are issued by American General Life Insurance Company (American General Life), except in New York, where they are issued by The United States Life Insurance Company in the City of New York (US Life). Products are marketed by SunAmerica, The Retirement Specialist. All products may not be available in all states. The purchase of a variable annuity is not required for, and is not a term of, the provision of any banking service or activity.
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