Are there any tax advantages to buying a variable annuity?
A. Yes, variable annuities are tax deferred. Tax deferral means that any amount earned in an annuity is not taxed until some point in the future. Interest, dividends and capital gains can accumulate without being subject to current income or capital gains taxes. Income taxes are paid on earnings at the time of withdrawal. A 10% penalty may be incurred on earnings withdrawn before age 59½.
