Taxes – nobody enjoys paying them, but they are a necessary burden in today’s society. There are many ways to reduce taxation on income, whether the income is from work or from investment returns. One tax-saving strategy that you may not be familiar with is purchasing an annuity. With an annuity, you set aside money in an insurance contract that grows tax deferred until withdrawn. Fixed annuities pay competitive interest rates; there are even some whose interest rates are guaranteed for the life of the annuity contract. While you are responsible for paying taxes once you begin to take withdrawals or receive payments from the annuity, buying an annuity can reduce the total amount that you pay to the government over a long period of time.

As mentioned above, funds growing in an annuity grow on a tax-deferred basis. You will not have to pay taxes on your interest earnings year after year, like you would with earnings from a certificate of deposit or other savings account. Not having to pay taxes on interest earnings means that earnings continue to compound, including money that you would usually use to pay taxes, resulting in a larger balance at the end of the annuity’s term.

Another way to save on taxes using annuities is to consider what tax bracket you’ll likely be in when you retire. Many people move from a higher tax bracket to a lower one after retirement, due to a lowered income. Obviously, the federal income taxes you will pay at a 15% bracket will be less than if you were in a 25% bracket. Waiting until you are in a lower tax bracket to start receiving annuity payments is a good tax-saving strategy.

If you are interested in learning more about saving money on taxes using an annuity, call the Specialists at AnnuityForLife.com at 1-888-261-6237. They can even show you how an annuity can help you save on Social Security taxation.