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The Power of Tax Deferral

Let's face it, you work hard for your money, and that's why you need your money to work hard for you. Of course, income tax is a fact of life - and it's not something over which you have a great deal of control. However, there is a way to accumulate money without having to pay taxes on it - at least not until you use it. It's called tax deferral, and several types of insurance and financial products offer it.


With tax-deferred products, you don't pay taxes on accumulated funds, interest or dividends until you actually withdraw the money. Since the gain in a tax-deferred product isn't taxed until it's withdrawn, it usually accumulates at a faster rate. For this reason, tax-deferred accumulation can provide a powerful financial edge.

If you participate in a 401(k) plan offered by your employer or if you own an individual Retirement Account (IRA), you're already enjoying the benefits of tax-deferred accumulation. Many insurance and annuity products also offer this advantage.


The following chart shows the tremendous difference tax deferral can make in the rate at which your money grows. If we assume that a single sum of $50,000 will be invested for 30 years at a hypothetical interest rate of 8%, we see that the tax-deferred vehicle provides better long-term accumulation. If you are in the 31% tax bracket, you may be able to accumulate about $250,620 in a taxable account. However, if you used a tax-deferred account for the same investment, you may accumulate over $503,100. (Please note that a 10% IRS tax penalty may be imposed on withdrawals from annuities, some insurance products, lRA's, or 401(k) plans, when these withdrawals are made before the purchaser has reached age 59 1/2.)

*Hypothetical rate used for illustrative purposes only. Not intended to predict nor guarantee any actual product results. This illustration does not reflect the effect of Mortality and Expense charges and Administrative fees. These fees would reduce the performance shown in the above illustration.


Tax-deferred products offer you control over your financial situation. Not only does your money accumulate but, if you are selective in your withdrawals and plan them accordingly, you can avoid getting "hit" with too many tax consequences when you do withdraw the money. Here's why:

  1. Tax deferral strategies work best for long-term planning, usually retirement planning. The idea is to leave the money where it is for a long time - to let it go and let it grow. Sure you'll be taxed on the money you start to withdraw after you've retired - but you may be in a lower tax bracket by then, which would serve to soften the tax blow
  2. You can be selective in your withdrawals and plan them so that you do not suffer unnecessary tax consequences. The tax system has "thresholds" (tax brackets) that will help you determine how much of these funds you can withdraw during a given year. If you are prudent with your withdrawals - and you don't break into a higher tax threshold - then the effect of these withdrawals on your taxes will be minimal, Remember, you're only taxed on what you withdraw.


With just one product, we can choose between many different sub-accounts managed by some of the top Investment Advisors in the country. We can incorporate proper ASSET ALLOCATION and all of the Dividends, Interest and Capital Gains grow 100% tax-deferred. Unlike most annuities that charge a penalty for early withdrawal that range from 5 to 9 years, this type of annuity has no surrender charge ever. Click below to view the list of different Variable Annuities which we feel are among the best available today.

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To contact us:
Tactical Wealth Advisors, LLP
8226 Village Harbor Drive
Cornelius, NC 28031
Phone: 800-944-7730


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