The importance of tax deferral

Maximize your clients' retirement savings goals

The Principal® Pivot Series Variable Annuity offers your clients another tax-deferred savings option. They’ll benefit from compounding interest on both their premium(s) and any interest earned. And there are no IRS contribution limits for nonqualified assets—so they don’t have to restrict their retirement savings goals.

How your clients' investment could benefit from tax deferral:

This chart shows a $100,000 investment with and without tax deferral.

Chart showing $100,000 investment with and without tax deferral.

$100,000 investment with and without tax deferral

Initial investment

$100k

Each investment started with a $100,000 investment compounding 10% per year for 20 years.

Value of taxable investment

$232,998

The value of the investment that isn't tax-deferred only grows to $232,998 at the end of 20 years because taxes were paid on earnings annually at a tax rate of 28%.

Value of tax-deferred investment

$320,714

After tax

$258,914

The value of the tax-deferred investment grows to $320,714 at the end of 20 years. Since taxes aren't paid on any potential earnings, the money compounds faster than if it was taxed. Even after taxes, the accumulated value would be $258,914.

Each investment started with a $100,000 investment compounding 10% per year for 20 years.

The value of the investment that isn't tax-deferred only grows to $232,998 at the end of 20 years because taxes were paid on earnings annually at a tax rate of 28%.

The value of the tax-deferred investment grows to $320,714 at the end of 20 years. Since taxes aren't paid on any potential earnings, the money compounds faster than if it was taxed. Even after taxes, the accumulated value would be $258,914.

Please note the illustration above is hypothetical and doesn’t represent any particular investment. It also can’t be used to predict an expected outcome for your particular situation.

Tax management

A client could also elect to take partial distributions from their annuity rather than a lump sum distribution. This allows the remaining accumulated value to continue to grow tax deferred, and the client doesn’t have to pay taxes all at once. This approach gives you flexibility in managing your client’s taxes.

Pivot resources

The power of
tax-deferred investments

The power of
tax-deferred
investments

Learn more

Contact your local Principal® rep to ask about variable annuity solutions: 

Call today: 800-309-1623
Request more information and we'll be in touch as soon as possible.

For financial professional use only. Not for distribution to the public.

 

Guarantees are based on the claims-paying ability of Principal Life Insurance Company.

 

The Principal Pivot Series Variable Annuity is issued by Principal Life Insurance Company and distributed by Principal Securities, Inc, 800-852-4450, member SIPC and/or independent broker/dealers. Securities offered by a Principal Securities, Inc. Registered Representative are offered through Principal Securities, Inc. Principal Life and Principal Securities, Inc. are members of the Principal Financial Group, Des Moines, Iowa 50392.

 

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The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.
 

 

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