Stock image | Photo by tiero/iStock/Getty Images Plus, St George News
FEATURES — Albert Einstein was ahead of his time. He revolutionized physics thinking, and his theory beginning with the breakout year of 1905, is still the basics of quantum physics today, over 100 years later.
When Einstein is remembered for his work, it is almost always E = mc², the theory of relativity. However, I think a more interesting part of Einstein’s life was his view on compound interest.
Albert Einstein called compound interest “the greatest mathematical discovery of all time.”
The power of tax deferral
Compound interest allows the account to grow by earning interest on the original investment and any accumulated interest. Here is a generally accepted definition of compound interest.
Stock photo | Photo by Atstock Productions/
iStock/Getty Images Plus, St George News
The interest is calculated on the initial principal and the accumulated interest of prior periods. Compound interest differs from simple interest in that simple interest is calculated solely as a percentage of the principal sum.
Compound interest is offered by banks and savings institutions and is also referred to as double compounding. The interest is credited, but it is taxable. The downside is when the interest is credited to your account and comes with tax liability.
Insurance companies offer products that allow for tax deferral and compounding but, under certain situations, can also defer the tax liability. These products are called annuities and life insurance. If the accumulated funds are left untouched, the tax liability is deferred.
This concept is referred to as triple compounding
If some of your savings are placed in an annuity, the benefit of tax deferral provides for:
- Interest on your principal
- Interest on your interest and
- Interest in your tax saving, because your interest is free from current income tax in an annuity, can all continue to compound instead of being withdrawn for tax payments
Is that all there is? No! There is also qquantum compounding.
Quantum compounding is building on triple compounding by adding features only found on certain insurance company annuities.
- A bonus of 5% to 10% may be available on funds deposited immediately and guaranteed
- Long-term care benefit riders may be available
- Lifetime income provisions
- Annual moveable minimum guarantees
- Full guarantees against loss and risk based on the insurance company’s ability to pay.
- Try avoidance using a named beneficiary
Consider the use of quantum annuities for added benefits and added value for yourself and your heirs.
Copyright © Lyle Boss, all rights reserved.
Lyle Boss is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management. As an asset protection educator, he has helped thousands of seniors navigate their financial retirement options. His clients include government employees, teachers, physicians, farmers and business executives, to name a few. Boss has actively taught advanced estate planning and asset preservation for more than 20 years in such places as the University of Utah and in over 200 “Senior Retirement Consumer Education Workshops” throughout Utah, Idaho and Wyoming. Boss and his wife, Deanna, live in South Ogden and St. George, Utah.
Comments are closed.