Tax-Deferred Annuities - Reduce Taxation of Your Social Security Benefits	back to home

Keep more of your social security benefit when you utilize annuities for savings.

Annuities can reduce the taxes you pay on social security benefits. This is made possible by the repositioning of bonds, CDs, and mutual funds, into tax-deferred annuities.

Depending on your retirement income, you may be paying tax on up to 85% of your social security benefit.

If you are single, here is what you pay;

• If you make $0 - $25,000 no tax is imposed on your Social Security benefit.
• If you make $25,001- $34,000 up to 50% of your Social Security benefits are taxed.
• If you make $34,001 – and up, 85% of your Social Security benefits are taxed.

If you are married and file jointly, here is what you pay;

• If you make $0 - $32,000 no tax is imposed on your Social Security benefit.
• If you make $32,001 - $44,000 up to 50% of your Social Security benefits are taxed.
• If you make $44,001 - and up, 85% of your Social Security benefits are taxed.

The provisional income formula put into place by congress in 1983 dictates how much of your social security benefits are subject to taxes. It also dictates which income vehicle, is included in the provisional income formula and which is excluded.
The net effect of the provisional income formula makes deferred growth from annuities advantageous with regard to taxation of your social security benefits, by keeping you in a lower provisional income bracket.

Tax deferred growth, within an annuity, does not count toward provisional income, and therefore can reduce the taxes you pay on social security benefits. Investments in municipal bonds and CDs increase your provisional income and, hence, your taxes. By repositioning those CDs or bonds into a tax-deferred annuity, you can avoid the tax.
(click here for pictorial example)

Since the Smiths are exceeding the limit of $44,000 for married couples, they are paying tax on 85% of their Social Security benefits.

Assuming the Smiths are not living off their investments, they would be much better off if they were to reposition that money into a tax-deferred annuity.

It's not what you earn, but again, what you keep! Annuities may help you keep more of your social security benefit, while simultaneously growing your retirement nest egg!

By repositioning their assets, the Smiths are now below the $32,000 limit and do not have to pay any tax on the social security benefits. This is what we mean when we talk about avoiding taxes on your social security benefits.

It's not what you earn, but again, what you keep! Annuities may help you keep more of your social security benefit, while simultaneously growing your retirement nest egg!

How does CD interest cause increased taxation of your social security benefits?

CD interest increases your "provisional income" as stipulated by congress, and tax-deferred growth inside an annuity does not. Therefore CD interest may increase the taxation of your social security benefits, while annuities in the deferral or accumulation phase do not. This allows the consumer to keep more of their social security benefits. How is your CD interest affected by federal tax, state tax, and inflation? Finally, how would your social security benefits be affected? You will be surprised by how much money you could lose by utilizing CDs when it comes to your social security benefits!

After federal and state tax, inflation, and taxation of Social Security benefits, your CD interest of $5,000 has been reduced to a net result of $2,175.