Deferring your taxes in an annuity is not getting out of paying your taxes; good to know! Tax deferral is legal, it does not get you out of paying taxes on the money you make from tax-deferred investment, it just postpones when you have to pay your taxes during the wealth accumulation phase. Tax deferral is designed to let you pay your taxes when you are older and your income is lower. At an advanced age your tax bracket is lower, hence you won’t have to pay as much taxes per year, in turn keeping more money in your pocket. Annuites were granted their tax-deferred status by the IRS through a specific Tax Code.

Annuities are not the only tax deferred savings vehicle (though they are the best, in my humble option). If you are paying taxes each year on your gains you are not in a tax deferred investment, this lessens the amount of money you have earning interest. You’re also paying these taxes while you’re in a higher tax bracket.

Annuities allow you to keep your premium and returns, earn interest on the whole amount and postpone paying taxes until you are retired and your tax rate is not so high. This gives annuities a major advantage over other savings vehicles. In any savings plan there are penalties for early withdrawal, so leave that money alone until you are age 59 ½.
The word ‘tax’ makes me shudder. I shudder to think about my 1099. That is why I own annuities. I think the fact of the matter is that we feel we must pay the maximum amount of taxes on investments and purchases to feel like we are doing the right thing. Don’t be afraid to take advantage of the tax deferral options that annuities offer us. Heck, the government tells us we can. TAX DEFERRAL IS NOT TAX PLUNDERING!
We as consumers and savers are not abusing, plundering or creating tax shelters. We should like the fact that the IRS goes after the aforementioned people and thank them for letting us defer our taxes. We need not feel guilty; we should feel glad about taking our retirement savings in our own hands. We need to be confident that we are not the ones taking advantage of the system, rather that we are using the system to our advantage.