Tax-deferred compounding is a powerful incentive to purchase an annuity. Compound interest is interest earned on principal, and added to the original principal as it is earned, in effect, earning interest on interest and principal.

The fact is that the more money is at work, the faster assets can grow. The greater the period of time, the larger the difference between compound and simple interest. And the more frequent the compounding period, the higher the return. With a deferred annuity, you can bring the power of long-term tax-deferred compounding to your clients. This power can be illustrated by comparing a tax-deferred investment, such as a deferred annuity, with a taxable investment, such as a CD.

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