The Power Of Tax Deferral
Normally, investment earnings such as interest, dividends and capital gains create taxable events that can slow down your investment growth. But the American Savings Life annuities receive favorable tax treatment:
- Taxes on your Annuity interest earnings are deferred until you actually receive them in the form of withdrawals or annuity payments.
- This deferral of taxes keeps more money at work and can potentially enhance the wealth-building process.
Another factor to consider: When you receive your earnings at a later time (through withdrawals or annuity payments), you may be in a lower tax bracket than you were during your younger higher earning accumulation years.
Comparison of Taxable versus Tax-Deferred Investment Performance
This hypothetical illustration assumes a $50,000 lump sum investment and a 28% federal tax bracket during the life of an investment with a 6% rate of return.
How does an American Savings Life Annuity not have “Market Risk”?
You may not want the risk of losing any of your hard-earned retirement funds, which as you know can happen with the stock or bond markets at the most inconvenient times.
On the other hand, you really want to earn a better interest rate than what CD’s and bank savings accounts pay.
An American Savings Life Annuity guarantees an above-market interest rate for the first year with a high “bailout” interest rate, and guarantees a fixed interest rate each year regardless of what the stock market or bond market does. This interest rate after the initial bailout guarantee period (i.e.: 3, 5, 7 or 9 years) is thereafter guaranteed for the lifetime of the policy contract to never be less than 2.0%, and without any annuity surrender penalties.
30-Day Money Back Guarantee
You have up to 30 days after the purchase of your American Savings Life Annuity to cancel the policy for any reason with no penalties, and your initial purchase payment will be returned. This is what we refer to as the free-look period.
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Bailout feature – If the annual renewal interest rate is ever less than the Bailout Rate, you may make a full or partial surrender within 30 days after the contract anniversary with no surrender charges.
The 6% hypothetical interest rate is used for illustrative purposes only and is not intended to project actual future incomes. The return is not indicative of any specific investment product or class of investments and is not intended to be a projection of future values. Actual returns will vary depending on your specific tax rate (which may be more or less than the figures shown). A lower tax rate on capital gains and dividends would reduce the favorable impact from the tax-deferred account. You should consider your investment time horizon and tax brackets, both current and anticipated.
In liquidating current taxable holdings, you may be subject to capital gains or losses which could impact your tax liability. Tax-deferred performance would be reduced by income taxes on gains upon withdrawal.
In addition, withdrawals from an annuity are subject to ordinary income taxes and prior to age 59 ½ may be subject to a l0% IRS penalty tax. An annuity surrender charge will generally apply if the withdrawal is made during the early years of the policy (i.e.: initial guarantee period).
Neither American Savings Life Insurance Company nor any of its representatives may provide tax or legal advice. Individuals should consult their tax advisor or legal counsel for specific advice and information regarding their individual situation.