Simple. Predictable. Designed for long-term financial security.
Lifetime Income Strategies programs are built on a tax-deferred annuity platform designed to help turn savings into a steady, reliable income stream—often for life.
An annuity is a financial product commonly used in retirement planning to provide income stability and predictability. It allows your money to grow on a tax-deferred basis, meaning earnings compound over time without annual taxation. This structure is often used to support long-term retirement income strategies and help reduce uncertainty in later life.
An annuity functions similarly to other retirement accounts such as an IRA, 401(k), 457 plan, or pension, in that growth is tax-deferred. Taxes are paid when funds are withdrawn.
For qualified retirement accounts, withdrawals are typically fully taxable because contributions and growth have not yet been taxed. For non-retirement funds (such as personal savings or proceeds from the sale of an asset), only the earnings are taxed—not the original principal—when withdrawals are made.
How Are Taxes Paid on Annuity Distributions?
Annuities are designed to provide tax-deferred growth, but it’s important to understand how taxes apply once you begin taking income.
Tax-Deferred Growth
While your money remains in the annuity, earnings grow tax-deferred. You do not pay taxes on interest or gains until you withdraw funds.
Ordinary Income Tax on Earnings
When you take distributions, the earnings portion is taxed as ordinary income—not capital gains. Your tax rate depends on your total taxable income in the year you take withdrawals.
How Withdrawals Are Taxed
Non-Qualified Annuities (after-tax dollars): Earnings are withdrawn first and are taxable. Once earnings are fully withdrawn, remaining principal is typically received tax-free.
Qualified Annuities (IRA, 401(k), etc.): Since contributions are generally pre-tax, the full distribution is typically taxable as ordinary income.
Annuitization Payments
If you convert your annuity into a structured income stream, each payment may be partially taxable and partially tax-free. The taxable portion is determined using an “exclusion ratio,” which spreads tax liability over the payout period.
Early Withdrawal Penalties
Withdrawals taken before age 59½ may be subject to a 10% IRS penalty on the taxable portion, in addition to ordinary income taxes (exceptions may apply).
Required Minimum Distributions (RMDs)
Qualified annuities are subject to RMD rules, meaning distributions must begin at a required age (currently 73, depending on birth year).
Let’s Build a Clear Path to Retirement Income
Whether you’re planning retirement, reviewing income options, or making financial decisions, the right strategy can guide your future.
If you’re ready for clarity—and a plan built around your goals—let’s connect.