Tax-Deferred Annuities - Reduce Taxation of Your Social Security Benefits

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)

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