Tax Advantages
Traditional savings are taxed each year whether you spend the earnings or not. The SPDA postpones that tax, enabling you to earn extra interest on your money. By postponing income taxes, your money compounds faster, making it possible to increase your income during your retirement years. This is often referred to as "the power of tax-deferred earnings". In this way, an SPDA works like a 401(k), IRA or Keogh plan.
Given this tax feature of an SPDA, we do not recommend that you purchase this product with before-tax dollars (e.g. 401(k), IRA and Keogh plans) as the tax advantages would be eliminated.
Another tax-favorable aspect of an SPDA is that you may be in a lower tax bracket at the Maturity Date, than you are when you purchase the SPDA, enhancing your taxable equivalent return. | | No Limit On the Amount You Can Invest
Unlike 401(k), IRA or Keogh plans, there is no limit on the amount you can invest in an SPDA. You determine your level of comfort in your retirement planning process and make an investment decision based upon your needs, not IRS limitations.
Option to annuitize the Contract Value
You have the option to convert an SPDA into a Single Premium Immediate Annuity (SPIA) for pay-out purposes on the Maturity Date. This process, known as "annuitizing the contract value", allows for further tax-deferral. The taxes payable on an SPDA at maturity can be paid over time with the periodic payments from an SPIA instead of all at once at the Maturity Date of the SPDA. |