Flowers and sweets are nice—but fleeting. This Valentine’s Day, help your clients think outside the heart-shaped box with a lasting way to show their love: tax-deferred retirement strategies.

Valentine’s Day is a celebration of love and thoughtful gestures. But what if you could guide your clients toward gifts for each other that last far longer than chocolates and roses? Here’s an unconventional—but meaningful—idea: Help couples give each other the gift of tax control through a nonqualified deferred variable annuity.

Why Retirement Savers Might Fall in Love with Tax Control

For many dual-income couples in their peak earning years, saving for retirement comes with unique challenges. High federal and state taxes often eat into gains from investments, leaving less to reinvest and compound for the future. This can be frustrating, as these couples may be in a lower tax bracket during retirement, which would reduce their tax obligations. 

The good news is that tax deferral through nonqualified variable annuities offers these clients a way to keep more of their money working for them. Instead of losing a portion of investment gains to taxes each year, they can decide when taxes are paid (generally) based on when they take withdrawals in the future, providing more flexibility and control over their retirement savings.

Plus, a variable annuity offers protected lifetime income which can help clients confidently build the retirement experiences they dream of—all while offering a beneficiary benefit should one spouse pass away. This gift goes beyond a thoughtful gesture; it can communicate an everlasting commitment to a couple’s partnership.

More to Love about Nonqualified Variable Annuities  

Nonqualified variable annuities bring several features to the table, making them a worthwhile consideration to help couples achieve a variety of retirement goals:

• More of Every Dollar Is Invested. With taxes deferred until distribution, 100% of every dollar stays invested, applying compounded growth potential to more of your clients’ money over time. This can accelerate the growth of assets, as illustrated by the Rule of 72.¹ The rule uses a formula to estimate the number of years it could take to double invested money at a given annual rate of return.
  
  
• Customizable Cash Flow. Clients can take distributions or opt for annuitization, which allows payments to include a mix of gains and return of premium—providing an opportunity for tax-managed income.
  
  
• Flexibility and Control. Nonqualified variable annuities enable clients to rebalance the underlying investment options and capture any gains without triggering taxes immediately. This allows growth potential for more dollars over a longer period of time and can help clients manage their tax liabilities strategically. 
  
  
• Beneficiary Benefits for Surviving Spouses. If one person in a married couple dies, the surviving spouse may become the new owner of the annuity. This option allows the surviving client to continue the tax-deferred growth potential feature of the annuity. In that sense, you can position a nonqualified variable annuity as a gift that can echo the love between a married couple long after one spouse passes. But watch for a common trap: If the nonqualified annuity is owned by a trust or if the beneficiary is a trust, the only distribution options will be either a lump sum or the five-year rule.

A Valentine’s Gift with Lasting Impact 

A nonqualified deferred variable annuity is more than a gift; it’s a way for couples to invest in their futures together. By using separate accounts focused on investments that won’t be taxed until withdrawn, every gain stays hard at work until it’s truly needed. And, in the event of the loss of a spouse, the gift continues to provide for the surviving spouse.

As with all financial strategies, it’s important to consider each client’s particular situation and an annuity’s costs, features, restrictions, and penalties, including the possibility of an additional 10% federal income tax on withdrawals taken before age 59½. However, if the client can and might be able to wait to take income, this strategy maybe a “good match.”

ACTIONS YOU CAN TAKE RIGHT NOW

• Check in with clients about their savings goals.
  
  
• Discuss the potential benefits of tax deferral and long-term growth.
  
  
• Evaluate whether or not a nonqualified deferred variable annuity can complement their retirement income strategies.
  

Additional Resources and Links

The Power of Tax Deferral Calculator

Give Clients the Gift of Sound Financial Futures

For more information about retirement-planning, please contact our Retirement Strategies Group at RSG@PacificLife.com or (800) 722-2333, ext. 3939. PacificLife.com

A beneficiary benefit is referred to as a death benefit in the prospectus.

¹CFI Team. ”Rule of 72.” Corporate Finance Institute. Accessed December 23, 2024

This material is provided for informational purposes only and should not be construed as investment, tax, or legal advice. Information is based on current laws, which are subject to change at any time. Clients should consult with their accounting or tax professionals for guidance regarding their specific financial situations.1 LIMRA, 2024 Retail Annuity Sales Power to a Record $432.4 Billion.” January 28, 2025.

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

Under current law, a nonqualified annuity that is owned by an individual is generally entitled to tax deferral. IRAs and qualified plans—such as 401(k)s and 403(b)s—are already tax deferred. Therefore, a deferred annuity should be used only to fund an IRA or qualified plan to benefit from the annuity’s features other than tax deferral. These features include lifetime income and death benefit options.

Annuity withdrawals and other distributions of taxable amounts, including death benefit payouts, will be subject to ordinary income tax. For nonqualified contracts, an additional 3.8% federal tax may apply on net investment income. If withdrawals and other distributions are taken prior to age 59½, an additional 10% federal income tax may apply. A withdrawal charge and a market value adjustment (MVA) also may apply. Withdrawals will reduce the contract value and the value of the death benefit, and also may reduce the value of any optional benefits.

Insurance product and rider guarantees, including optional benefits and any fixed crediting rates or annuity payout rates, are backed by the financial strength and claims-paying ability of the issuing insurance company. They are not backed by the
independent third party from which this annuity is purchased, including the broker/dealer, by the insurance agency from which this annuity is purchased, or any affiliates of those entities, and none makes any representations or guarantees regarding the claims-paying ability of the issuing insurance company.

Pacific Life Insurance Company and in all states by Pacific Life & Annuity Company. Product/material availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues.

Securities are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company.

The home office for Pacific Life & Annuity Company is located in Phoenix, Arizona. The home office for Pacific Life Insurance Company is located in Omaha, Nebraska.

This material is intended for financial professional use only. If you are not a financial professional, please visit our public website at PacificLife.com.

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