Inflation Revisited
Since inflation is on everyone’s mind, here we look at the devastating effect that taxes and inflation will have on a senior’s taxable interest. Look at what happens to one dollar in taxable interest. Twenty-eight cents is lost in federal income taxes. Five cents can disappear because of inflation, and if you reside in a state with state income taxes, another five cents can be taken away from you. So, for every one dollar you earn in taxable interest; you have only 62 cents remaining even if you don’t withdraw the interest. You have lost 38% of your purchasing power because of taxes and inflation.
Assumes premium of $100,000.
DISCLAIMER
Bank CDs are insured up to $100,000 by the FDIC and offer a fixed rate of return whereas both principal and yield of securities will fluctuate with changes in market conditions. Other types of insurance products and investments, such as fixed or variable annuities, have earnings which are taxable upon withdrawal and if taken before age 59.5 may be subject to a 10% Federal early withdrawal penalty.
