Inheriting non-spousal annunity

[Gigi3000]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...

[retiredguy123]

I would never buy an annuity. The advisor is recommending it because they want to make a commission on your money that will be about 10 percent of the cost. So, if you invest $360,000 in the annuity, the advisor will make about $36,000. I very nice pay day. Don't do it without doing a lot of research on annuities. They are almost never a good investment.

On a $200,000 long term capital gain, the tax should only be about $30,000, which is 15 percent, unless there are other circumstances.

[Aces4]

I’d take the money, run and stay out of the stock market.

[Gigi3000]

I would never buy an annuity. The advisor is recommending it because they want to make a commission on your money that will be about 10 percent of the cost. So, if you invest $360,000 in the annuity, the advisor will make about $36,000. I very nice pay day. Don't do it without doing a lot of research on annuities. They are almost never a good investment.

On a $200,000 long term capital gain, the tax should only be about $30,000, which is 15 percent, unless there are other circumstances.

Really? I don't know alot about taxes but I looked at the tax table for that amount and I saw 37%. There definitely is no other income. I sold a condo and am living off those proceeds. Thanks for your info

[Stu from NYC]

I would talk to a fee only financial adviser.

[Gigi3000]

I’d take the money, run and stay out of the stock market.

Yeah, I've read that the market is suppose to take a dive. Banks removing lines of credit etc. I'll probably take lump sum if only have to pay $30000 in taxes.

[Two Bills]

Buyer Beware: How Low Interest Rates Impact Annuities (http://blog.acadviser.com/buyer-beware-how-low-interest-rates-impact-annuities)

[CoachKandSportsguy]

OK, a commercial finance manager here, and this board is not the place to find the best answer for your particular situation. Please find a fee only, independent CFP, and ask him to build you a model of your cash flow versus your assets and your tax situation. Living off of assets versus living off of income is not the best situation

finance guy who wants to get his CFP

[Gigi3000]

[QUOTE=CoachKandSportsguy;1990414]OK, a commercial finance manager here, and this board is not the place to find the best answer for your particular situation. Please find a fee only, independent CFP, and ask him to build you a model of your cash flow versus your assets and your tax situation. Living off of assets versus living off of income is not the best situation

finance guy who wants to get his

That seems extreme to just get a tax question answered. Also I'm staying liquid to possibly buy a small farm in the next year or two. Monthly expenses are only $1200 mo currently.

[Stu from NYC]

[QUOTE=CoachKandSportsguy;1990414]OK, a commercial finance manager here, and this board is not the place to find the best answer for your particular situation. Please find a fee only, independent CFP, and ask him to build you a model of your cash flow versus your assets and your tax situation. Living off of assets versus living off of income is not the best situation

finance guy who wants to get his

That seems extreme to just get a tax question answered. Also I'm staying liquid to possibly buy a small farm in the next year or two. Monthly expenses are only $1200 mo currently.

You are dealing with a significant amount of money dont you want answers from people who have a background in finance and accounting?

[Gigi3000]

I would never buy an annuity. The advisor is recommending it because they want to make a commission on your money that will be about 10 percent of the cost. So, if you invest $360,000 in the annuity, the advisor will make about $36,000. I very nice pay day. Don't do it without doing a lot of research on annuities. They are almost never a good investment.

On a $200,000 long term capital gain, the tax should only be about $30,000, which is 15 percent, unless there are other circumstances.

You're right. I looked at ordinary income but this is long term capital gains. Do you know if you pay short term gains inside of an annunity?

[Gigi3000]

[QUOTE=Gigi3000;1990445]

You are dealing with a significant amount of money dont you want answers from people who have a background in finance and accounting?

I thought I might at one time but I have lots of time to mull this over and I don't see my situation as all that difficult. Not currently anyway. Might be something I'd do in a year or so tho. Plus I want to learn and this is the best way but I might take some lumps

[retiredguy123]

You're right. I looked at ordinary income but this is long term capital gains. Do you know if you pay short term gains inside of an annunity?
Any income that you make in an annuity and withdraw will be taxed as ordinary income. That is one of the major disadvantages of annuities that many advisors neglect to tell you when they sell it to you. They claim that you are investing in the stock market but you don't get the advantage of the lower capital gains rate that you would normally receive outside of an annuity. But, all short term gains (less than a year) are taxed as ordinary income. So, to benefit from the lower capital gains rate outside of an annuity, you need to hold the investment for at least one year.

I would seriously consider just paying the capital gains tax and invest the money in a conservative portfolio of Vanguard index mutual funds. 30 percent S&P 500 Index Fund, 30 percent Short Term Bond Index Fund, and 40 percent money market fund. Then, do some independent research on investing before making any more financial decisions.

[Gigi3000]

Any income that you make in an annuity and withdraw will be taxed as ordinary income. That is one of the major disadvantages of annuities that many advisors neglect to tell you when they sell it to you. They claim that you are investing in the stock market but you don't get the advantage of the lower capital gains rate that you would normally receive outside of an annuity.. But, all short term gains (less than a year) are taxed as ordinary income. So, to benefit from the lower capital gains rate outside of an annuity, you need to hold the investment for at least one year.

So I'm back to paying $70000 tax if take lump sum??

[retiredguy123]

So I'm back to paying $70000 tax if take lump sum??
It's possible, based on the type of annuity. I would ask a tax preparer to calculate your options for cashing out the annuity and paying the taxes immediately, or if you can spread the cash payments over a few tax years and maybe reduce the tax payments, based on your marginal tax rate. But, I would want to cash out the annuity and reinvest the money instead of buying another annuity. Whatever taxes are owed, they can only be delayed, but not avoided. My opinion. Good luck.

[Gigi3000]

Any income that you make in an annuity and withdraw will be taxed as ordinary income. That is one of the major disadvantages of annuities that many advisors neglect to tell you when they sell it to you. They claim that you are investing in the stock market but you don't get the advantage of the lower capital gains rate that you would normally receive outside of an annuity. But, all short term gains (less than a year) are taxed as ordinary income. So, to benefit from the lower capital gains rate outside of an annuity, you need to hold the investment for at least one year.

I would seriously consider just paying the capital gains tax and invest the money in a conservative portfolio of Vanguard index mutual funds. 30 percent S&P 500 Index Fund, 30 percent Short Term Bond Index Fund, and 40 percent money market fund. Then, do some independent research on investing before making any more financial decisions.

I'm familiar with Vanguard and index funds. Good suggestion. I have about 15% of my portfolio in VTSAX. I'm pessimistic about the market. Any other recommendations in place of the S&P 500 index fund?

[retiredguy123]

I'm familiar with Vanguard and index funds. Good suggestion. I have about 15% of my portfolio in VTSAX. I'm pessimistic about the market. Any other recommendations in place of the S&P 500 index fund?
I have a small percentage invested in the High Yield Bond Fund, which is paying about 3 percent and invested in low quality corporate bonds. It has been my best income producer. But, I am afraid to put a lot of money into bonds because, if interest rates go up, the bond values will go down faster than stocks. So, if you don't want to be in stocks, you don't have many choices. I would definitely stay away from bond funds that have an average maturity of more than 10 years. Very risky if interest rates rise.

[Aces4]

That seems extreme to just get a tax question answered. Also I'm staying liquid to possibly buy a small farm in the next year or two. Monthly expenses are only $1200 mo currently.



I’d go with the small farm. A tangible asset is the best investment with the financial mess out there. At least you can put food on your table.

[Gigi3000]

I have a small percentage invested in the High Yield Bond Fund, which is paying about 3 percent and invested in low quality corporate bonds. It has been my best income producer. But, I am afraid to put a lot of money into bonds because, if interest rates go up, the bond values will go down faster than stocks. So, if you don't want to be in stocks, you don't have many choices. I would definitely stay away from bond funds that have an average maturity of more than 10 years. Very risky if interest rates rise.

Right on long term bonds. Ok..thanks for the info

[Gigi3000]

I’d go with the small farm. A tangible asset is the best investment with the financial mess out there. At least you can put food on your table.

My thoughts exactly. I'm hoping real estate prices will drop a little although Dave Ramsey says they won't.

[dewilson58]

My thoughts exactly. I'm hoping real estate prices will drop a little although Dave Ramsey says they won't.

Farm prices are high because farm products are high.

[Aces4]

My thoughts exactly. I'm hoping real estate prices will drop a little although Dave Ramsey says they won't.

I don’t think prices will drop much either, not with over a million people pouring over the border in the first half of the year. Housing is being squeezed tremendously. I’m also reluctant to take suggestions from people with their money in the overvalued stock market. I personally feel they’re looking to prop up of their investment and not providing unbiased opinions.

[retiredguy123]

I don’t think prices will drop much either, not with over a million people pouring over the border in the first half of the year. Housing is being squeezed tremendously. I’m also reluctant to take suggestions from people with their money in the overvalued stock market. I personally feel they’re looking to prop up of their investment and not providing unbiased opinions.
So, anyone who has some of their money in stocks cannot offer an unbiased opinion? Seems a bit of a stretch. Almost every financial advisor recommends stocks as part of anyone's balanced portfolio.

[Mrprez]

My financial advisor (who hates paying taxes) rolled my inherited annuity into an annuity at Lincoln Life. There were several options there. I have it setup to generate a monthly taxable income with a life insurance component for my wife or other beneficiaries.

I paid no tax on the rollover but I do pay income tax on the monthly income. I have been taking these distributions for two years now and there is more in the annuity than when I started.

Others may disagree, but for me this is perfect.

[Aces4]

So, anyone who has some of their money in stocks cannot offer an unbiased opinion? Seems a bit of a stretch. Almost every financial advisor recommends stocks as part of anyone's balanced portfolio.

Do you really think people/financial advisers highly vested in the stock market would give you any advice other than that? You may get unbiased info from an economist. And it is very likely capital gains may soon take a bigger tax hit to prop up our wobbly economy. It seems stretchy to me to think otherwise.

If you opt to gamble in the market OP, at the very least use a fiduciary advisor.

[rjm1cc]

Ask what the fees are and penalty if you take the money out of the new annuity in a year or two. I do not think you will like the answer.
I think you want to look for someone to help you make a choice. I would try a few CPA firms since they do not sell annuities and ask that the person works with annuities as they probably do not for most.
An immediate annuity is what you want for minimum cost and maximum payout to you.
You mentioned the work bank. In my opinion never buy investments from a bank. Annuities should not be sued as an investment.
Shop around for an immediate annuity and let the salesman tell you what is wrong with the proposed annuity. If you want monthly income then go for the immediate annuity.
If you go for an immediate annuity let the selling company transfer the old annuity from that company to you. You do not want to get any of the proceeds as it could cost you taxes.
If you want to cash out you can probably take out what ever dollars you want. Could spread over several years. Note the first 200000 will be taxed as income and your income will be a lot higher so your tax bracket will also be high. You could have say 25 to 30% Federal tax (guess) plus state tax.
You have a good start researching before you start talking to professionals.

[Papa_lecki]

Listen, i am a CFO and I would not answer your question without asking you a lot of other questions. Don’t get financial advise from the internet.

[Joe C.]

Call Blackston Financial and talk to one of their fiduciaries. Stay away from financial advisors or stockbrokers. I've done well by Blackston. Just see what they have to say, and see what they offer. No pressure from them, just good, honest advice.

[Boomer]

Sloooooow down -- and take a deep breath. When coming into money, it is best to take your time and learn what you can. Never buy anything that you do not understand.

Of course, you are not going to take financial advice from a bunch of strangers on the internet. But, if I were you, I sure would not be taking advice from a bank advisor. Any advisor is in business to sell. They are not doing charity work. But I am particularly not a fan of bank advisors -- based on stories I have heard from others, including a couple of friends who worked at banks.

If I were you, I would first find a good CPA. (A couple of other posters here have said that, too.)

Your first issue is how to handle tax implications and how to minimize the hit. I think the SECURE Act (1/01/20) might have made some changes to the tax law as it affects inherited annuities. There could also be the possibility of a stretch to help with taxes.

I have done only cursory reading on the SECURE Act and on inherited annuities. But I am not in your situation. Give these things a Google. I think Kiplinger might have some good articles that are not too involved but can help you start to understand what you're in for.

Sometimes we have to get to the point of looking for answers by first understanding what our questions should be. Get yourself some of the vocabulary of taxes and find that CPA and learn what to do to be able to keep as much of your money as you can. You have a lot of things to figure out. If I were you, I would not buy into any investments right away. While it can be painful to sit on cash in the bank with hardly any interest, it can also let you sleep at night. (I give all investments the sleep test.)

Your idea of buying a small farm sounds like it could be something you have thought about for a long time. My assumption is that you are not thinking of a huge operation but of several acres, zoned agricultural, where you can pursue whatever it is you want to do on your very own land.

If that farm is your dream and you can make it work, there is nothing wrong with sitting on cash until you decide for sure what to do.

I am not a financial advisor, nor do I want or pretend to be.

But I have been at it for our own purposes, for a long time.

I do not pretend to always win or to be making a killing in the market. I never tell anyone else what stocks to buy.

My investment and tax vocabularies are limited to just the things I need to know. (Btw, Investopedia is a good online source for defining and explaining any investment terms you do not understand.)

I believe in keeping a moat of cash around stock investments.

I also believe that it is important to never get yourself into a position where you have to sell stock to pay taxes.

Do not let some "advisor" envelop you in smoke and mirrors language to try to make you feel like they know a whole lot of stuff that you don't. If you decide to go with an advisor, interview several. But, for now, think about finding a CPA and figure out what to do about the taxes. Then think and think and think and then proceed.

I wish you the best.

Boomer

PS: Advisors, for the most part, can now brag about big returns. This old bull market has been running for a looooong time. I think my dog could have been getting impressive returns for the past decade or more.

[Eg_cruz]

I would never buy an annuity. The advisor is recommending it because they want to make a commission on your money that will be about 10 percent of the cost. So, if you invest $360,000 in the annuity, the advisor will make about $36,000. I very nice pay day. Don't do it without doing a lot of research on annuities. They are almost never a good investment.

On a $200,000 long term capital gain, the tax should only be about $30,000, which is 15 percent, unless there are other circumstances.
That is wrong……they don’t make 10%
Why you roll into a new annuity because he can spread the taxes over the years. FYI annuities are not long term gain they are tax as ordinary income. Maybe you should not advise people on what you are not sure on.
There are a lot of good annuities they can look into.

[Rwirish]

Disagree 100% regarding annuities.

[Eg_cruz]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...
No reason to close it and pay the taxes. There are a lot of good annuities out there.
Quick tip: be careful of variable annuities they have a lot in fees. Don’t buy a Fixed Index Annuity and put riders on them again because of the fees.
Your best bet is a simple Fixed Index Annuity because you are inheriting the annuity you will have to take distributions every year which will help with spreading the taxes out over the years.
Don’t get an annuity with a bonus either, nothing is for free when you get a bonus your returns over the years will be a lot less then a annuity without a bonus.
Don’t get annuity with more then 10 yr surrender (because you are younger then 65 you can get one for longer) in fact the 7 yr annuity have higher returns.
Feel free to email if you have any questions.

[Eg_cruz]

Yeah, I've read that the market is suppose to take a dive. Banks removing lines of credit etc. I'll probably take lump sum if only have to pay $30000 in taxes.
$30k is wrong
You will be taxed as ordinary income. So take your income today and add $200k and that is what you will pay tax on. Ask yourself how long will it take to make that money tax money back with the funds I have left over.
$200,000 - taxes 28%(est) $56,000 balance $144,000…….how long does $144,000 take to make $56,000

[Eg_cruz]

You're right. I looked at ordinary income but this is long term capital gains. Do you know if you pay short term gains inside of an annunity?
It’s not Long term capital gains……it’s ordinary income

[Out&Proud]

Always seek financial guidance from a or several finance professional not a message board!

[Luggage]

The only people who like annuities are the salespeople. You can go to any accountant and for about a hundred bucks an hour you can discuss your own financial disposition. I don't know why you are not taking social security, but I hope if you're 65 you're on Medicare and have part d at least . And also two or three opinions and spend a few hundred bucks with both the accountant and a tax attorney

[glennl0159]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...

I work in the insurance/investment world. Because of the SECURE Act and that it is a Inherited annuity you will have 2 options.
If it was an IRA account you have 10 years to pay the taxes you decide how all now, a little each year, or all at once at the end of the 10 years.
If it was non-IRA, you have up to 5 years to pay the taxes either all now or equally over 5 years.
No matter what it is taxable ordinary income and your tax rate that goes with it.
If you have no current taxable income as you mentioned it would make much more sense to liquidate it over time and pay at lower tax rates as this would be your only income.

[Kjbatl]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...

The previous responses are correct to tell you to get a fee only financial planner i.e. one that does not sell any investment products. The main reason is this person will look at the specific products your money is currently in and they will also look at all avenues for inheritance that could reduce your tax outlay. They will not be looking at a specific product to put your money in that makes them a commission or only what their bank sells. Can't stress enough that they will look at your entire situation and will ask what your goals are in the future to give you the best strategy to make those goals a reality. An example would be giving you a recommendation on when taking social security is best to meet those goals. It might cost you $800 or $1,000 upfront for a good advisor, but they can save you thousands on future taxes or mistakes picking the wrong investment products to meet your goals.
We interviewed a few advisors and talked about what we wanted to get out of the process and got an overview of what they did, what to expect, fees, etc. Once we were set on an advisor, then we had to bring them statements and details of accounts like the annuity you speak of inheriting. After they had our information, it took them about a week and then we met again to go over what they came up with. The binder of information was a couple inches thick and provided detailed analysis from current age to end of life expectancy. It was well worth the $1,000 we spent as it kept us from making some mistakes that would have cost much more in returns and taxes over the following few year. Hope this helps.

[noslices1]

If it’s a 10 year guaranteed annuity, if you died before you are 73, your spouse would only get the amount that would have been paid through the ten yers and the rest will be forfeited, however, if you lives to be 93, you will receive lots more than it is now if it’s a lifetime annuity. It will be steady income you can count on every month though. Make sure the payout interest rate is over 7 or 8%.

[b0bd0herty]

I would never buy an annuity. The advisor is recommending it because they want to make a commission on your money that will be about 10 percent of the cost. So, if you invest $360,000 in the annuity, the advisor will make about $36,000. I very nice pay day. Don't do it without doing a lot of research on annuities. They are almost never a good investment.

On a $200,000 long term capital gain, the tax should only be about $30,000, which is 15 percent, unless there are other circumstances.

You absolutely need to check out a Certified Financial Planner. We started with Senior Financial Security (who also work with BucketListWealth) and they first asked us what is our goals. Their vision is, "Helping seniors and retirees protect their assets from stock market downturn, nursing homes and Uncle Sam."
Since then our investments have only gone up. They are very personable and Jean Ann Dorrell is also a Certified Estate Planner, author and has been seen on Fox News, reutors, Wall Street Journal and many more. Honestly, you can't go wrong just talking to her.

Her facebook page is Senior Financial Security and a web site that you can schedule an appointment on is, senfinancial.com

[Ameliafay]

Parady Financial has hundreds of clients here in The Villages. You really should talk to them before making a decision.

[Petersweeney]

Cash good….
Annuities bad!!!!
Ask any caveman….

[will1546]

Don’t worry about what the agent makes. Look for principal protection, low taxes on gains and if it meets your goals.

[retiredguy123]

Parady Financial has hundreds of clients here in The Villages. You really should talk to them before making a decision.
Parady will try to sell you another annuity.

[BumpaOompa]

Good God man! You’re all over the place here. Seek the advice of a qualified financial planner. A negligible cost considering the asset. If instead you prefer to take the guidance of strangers on an anonymous message board then I have a bridge for sale.

[valuemkt]

Look up a Gentleman by the name of Wade Pfau. He has written several books on retirement planning, and the one titled "Safety First" Retirement Planning has about half the book dedicated to the discussion of various types of annuities. While I am definitely not an annuity fan, I read the book on the advise of others to expand my knowledge on the various types of annuities. While I somewhat agree on hiring a fee based financial planner, I believe what you need first is to find a good tax accountant who can give you definitive advice on the tax based aspects of your situation. I believe that Pfau has a blog where you can ask questions pertinent to you situation.

[richs631]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...

In general, annuities are not your friend. But banks and brokers love them because of ongoing commissions.

[Mohawksin]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...

OP -- where did the money come from?. Did you inherit it? If so, the rules change and have not been mentioned. The question initially lies with a CPA in your state, then with a CFP.

[richs631]

Really? I don't know alot about taxes but I looked at the tax table for that amount and I saw 37%. There definitely is no other income. I sold a condo and am living off those proceeds. Thanks for your info

The tax table is misleading. You will not pay 37% on the full amount

[BlackHarley]

Hmmm....FINRA regulator bait?..Just sayin'

[tklloop]

The best option is to give me your money and trust me to do what’s best for both of us!! OH,, and take Social Security AS SOON AS you can!!

[MrFlorida]

Whenever somebody wants to sell me an annuity, I RUN..... commissions, fees, riders..... they are not what they seem..

[Hopeful Returnee]

Any income that you make in an annuity and withdraw will be taxed as ordinary income. That is one of the major disadvantages of annuities that many advisors neglect to tell you when they sell it to you. They claim that you are investing in the stock market but you don't get the advantage of the lower capital gains rate that you would normally receive outside of an annuity. But, all short term gains (less than a year) are taxed as ordinary income. So, to benefit from the lower capital gains rate outside of an annuity, you need to hold the investment for at least one year.

I would seriously consider just paying the capital gains tax and invest the money in a conservative portfolio of Vanguard index mutual funds. 30 percent S&P 500 Index Fund, 30 percent Short Term Bond Index Fund, and 40 percent money market fund. Then, do some independent research on investing before making any more financial decisions.

If your annuity is non-qualified that means some of the money was taxed and some was not. In my case the original investment was taxed and the profit made over the years has not been taxed. I was told by the company that the profit will be taxed as regular income and not as capital gains.

[Singerlady]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...
Consult a financial advisor! Plenty here for you…or wherever you are. Don’t consult an annuity guy. They’ll take their huge chunk up front. I had only annuities until I moved here. New hubby and financial advisor talked me into not buying more. They were RIGHT! Financial advisor put me in a moderately risky set of investments without annuities. Doing well! Monitored constantly. Waiting until my annuities ‘mature’ in order to get out of them or keep some depending on their growth. They’re only getting 2% now and I’m getting 8% in my other investments. Also consult your tax advisor.

[drstevens]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...

Contact Ric Edelman's office at www.ricdelman.com for a free consultation.

[MandoMan]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...

Indexed mutual funds are a great place to put your money. In my opinion, annuities are among the worst places to put your money. They won’t give you that big an annuity, and usually when you die, it is gone. With a mutual fund, when you die, it can be passed on to your heirs. Put the money in the fund and leave it there. Don’t try to play the market. Don’t get nervous if it drops—it will go back up. You can arrange to have a certain amount put in your bank account every month, just like with Social Security, but better if you just let it grow. I like T Rowe Price New Horizons Fund right now. My mutual funds have doubled in value since the Fall of 2016. That’s 100% in five years. Don’t listen to the people who say that at your age you should put part of it in bonds, and part in the money market, etc. that’s how brokers get their fees and get rich. With a good indexed mutual fund from a company with a very good reputation, you pay very little in fees. By contrast, some of these brokerages and money managers will charge you a lot in fees, like thousands a year.

[Hiltongrizz11]

An annuity is an insurance product.
Exist for a reason and some people can make sense out of them for their situation.

[Notsocrates]

[QUOTE=CoachKandSportsguy;1990414]OK, a commercial finance manager here, and this board is not the place to find the best answer for your particular situation. Please find a fee only, independent CFP, and ask him to build you a model of your cash flow versus your assets and your tax situation. Living off of assets versus living off of income is not the best situation

finance guy who to just get a tax question answered. Also I'm staying liquid to possibly buy a small farm in the next year or two. Monthly expenses are only $1200 mo currently.

Then consult an accounrant.
Advice is wortth what you pay for it.

[DaleDivine]

The best option is to give me your money and trust me to do what’s best for both of us!! OH,, and take Social Security AS SOON AS you can!!

Best answer yet...
:1rotfl::1rotfl::MOJE_whot:

[waynehal55]

[QUOTE=Gigi3000;1990350]I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...[/QUOTE

NEVER buy a variable annuity, I purchased one almost 20 years ago.
The commission the seller makes and annual maintenance fees are outrageous.
I am a Vanguard investor for 4 decades and should have known better, I listened to a "friend". I periodically make withdrawals and was lucky that the stock market was very strong. I should have just put the money in a S&P fund, Vanguard charges only 4 basis points, a year.

[HJBeck]

Agree with this assessment.

[FredJacobs]

I would never buy an annuity. The advisor is recommending it because they want to make a commission on your money that will be about 10 percent of the cost. So, if you invest $360,000 in the annuity, the advisor will make about $36,000. I very nice pay day. Don't do it without doing a lot of research on annuities. They are almost never a good investment.

On a $200,000 long term capital gain, the tax should only be about $30,000, which is 15 percent, unless there are other circumstances.
Sorry, gains from annuities are taxed as ordinary income not capital gains. If you have no other taxable income, your gain of $40,000 would be reduced by the standard deduction - $12,550 - leaving $27,450 as taxable income. The tax on $27,450 for a single person, under age 65, is roughly $3,000.

I am no longer licensed to give investment advice. From a tax standpoint and that you need income it might be a good idea to surrender the annuity and find a vehicle to provide some annual income.

Fred Jacobs
Expert Tax Prep

[billthecpa]

I find it mind-boggling that someone would ask this question of anyone other than a qualified, experienced, professional financial or investment advisor (who does not sell annuities).

[dewilson58]

I find it mind-boggling that someone would ask this question of anyone other than a qualified, experienced, professional financial or investment advisor (who does not sell annuities).

I would inject "tax".

A qualified, experienced tax professional.

Investment advisors can not practice in front of the IRS.

:popcorn:

[retiredguy123]

I find it mind-boggling that someone would ask this question of anyone other than a qualified, experienced, professional financial or investment advisor (who does not sell annuities).
The problem is that most financial "advisors" are not qualified to provide unbiased advice because they make most of their money on commissions. So, they have a built in conflict of interest. There are "fee only" advisors, but that is not the norm in the financial industry. Many people feel like they will not get their money's worth by paying a fee just for advice. Annuities are the most recommended product because they offer the highest commissions for an advisor.

[arbajeda]

GREAT ZOT!! Break down and talk to a real financial adviser! And not the one who stands to benefit from selling you something that will benefit him more than it does you! Or you can listen to that banker or whichever of these "experts" confuses you the least. But following the advice of either of them likely will put you in need of a proctologist to deal with the aftereffects.

[Aces4]

Agree with this assessment.



Which assessment, there are pages of assessments here. When responding to a certain post, hit the “quote post” button first and it will bring the statement you agree with into your conversation. Hope this helps you, it will help us understand your comment.

[Aces4]

Good God man! You’re all over the place here. Seek the advice of a qualified financial planner. A negligible cost considering the asset. If instead you prefer to take the guidance of strangers on an anonymous message board then I have a bridge for sale.

I beg to differ, first talk to a CPA for accurate tax consideration and then a fiduciary advisor. (I’d really buy the farm:icon_wink:)

[Gigi3000]

My financial advisor (who hates paying taxes) rolled my inherited annuity into an annuity at Lincoln Life. There were several options there. I have it setup to generate a monthly taxable income with a life insurance component for my wife or other beneficiaries.

I paid no tax on the rollover but I do pay income tax on the monthly income. I have been taking these distributions for two years now and there is more in the annuity than when I started.

Others may disagree, but for me this is perfect.

Would it be the Lincoln Advantage indexed variable annunity?

[Gigi3000]

Sloooooow down -- and take a deep breath. When coming into money, it is best to take your time and learn what you can. Never buy anything that you do not understand.

Of course, you are not going to take financial advice from a bunch of strangers on the internet. But, if I were you, I sure would not be taking advice from a bank advisor. Any advisor is in business to sell. They are not doing charity work. But I am particularly not a fan of bank advisors -- based on stories I have heard from others, including a couple of friends who worked at banks.

If I were you, I would first find a good CPA. (A couple of other posters here have said that, too.)

Your first issue is how to handle tax implications and how to minimize the hit. I think the SECURE Act (1/01/20) might have made some changes to the tax law as it affects inherited annuities. There could also be the possibility of a stretch to help with taxes.

I have done only cursory reading on the SECURE Act and on inherited annuities. But I am not in your situation. Give these things a Google. I think Kiplinger might have some good articles that are not too involved but can help you start to understand what you're in for.

Sometimes we have to get to the point of looking for answers by first understanding what our questions should be. Get yourself some of the vocabulary of taxes and find that CPA and learn what to do to be able to keep as much of your money as you can. You have a lot of things to figure out. If I were you, I would not buy into any investments right away. While it can be painful to sit on cash in the bank with hardly any interest, it can also let you sleep at night. (I give all investments the sleep test.)

Your idea of buying a small farm sounds like it could be something you have thought about for a long time. My assumption is that you are not thinking of a huge operation but of several acres, zoned agricultural, where you can pursue whatever it is you want to do on your very own land.

If that farm is your dream and you can make it work, there is nothing wrong with sitting on cash until you decide for sure what to do.

I am not a financial advisor, nor do I want or pretend to be.

But I have been at it for our own purposes, for a long time.

I do not pretend to always win or to be making a killing in the market. I never tell anyone else what stocks to buy.

My investment and tax vocabularies are limited to just the things I need to know. (Btw, Investopedia is a good online source for defining and explaining any investment terms you do not understand.)

I believe in keeping a moat of cash around stock investments.

I also believe that it is important to never get yourself into a position where you have to sell stock to pay taxes.

Do not let some "advisor" envelop you in smoke and mirrors language to try to make you feel like they know a whole lot of stuff that you don't. If you decide to go with an advisor, interview several. But, for now, think about finding a CPA and figure out what to do about the taxes. Then think and think and think and then proceed.

I wish you the best.

Boomer

PS: Advisors, for the most part, can now brag about big returns. This old bull market has been running for a looooong time. I think my dog could have been getting impressive returns for the past decade or more.

I've been advised of the Secure Act yep. Probably what I'll do is cash out and put the money toward the farm for my.kids to run while I romp in Florida in the winter :). I know I'll pay $70000ish in taxes but property in Cental Ohio is booming and with Columbus growing so rapidly, it'll probably be my best bet. Then I'll heir it to them and feel better that they'll eat the rest of their lives them Armagendon comes :).

[TNLAKEPANDA]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...

I would strongly suggest that you go talk to the folks at Parady Investments. They will give you good advice and no sales pressure! Don’t do anything until you have gotten solid advice.

[dewilson58]

I would strongly suggest that you go talk to the folks at Parady Investments. They will give you good advice and no sales pressure! Don’t do anything until you have gotten solid advice.

WOW.


:popcorn::popcorn::popcorn:

[Gigi3000]

OP -- where did the money come from?. Did you inherit it? If so, the rules change and have not been mentioned. The question initially lies with a CPA in your state, then with a CFP.

It's a non spousal inherited annunity, not an IRA. A relative passed and.left it.to.me

[Boomer]

I've been advised of the Secure Act yep. Probably what I'll do is cash out and put the money toward the farm for my.kids to run while I romp in Florida in the winter :). I know I'll pay $70000ish in taxes but property in Central Ohio is booming and with Columbus growing so rapidly, it'll probably be my best bet. Then I'll heir it to them and feel better that they'll eat the rest of their lives them Armagendon comes :).


Aha! :) I know the territory of which you speak. It is that lovely, flat, green belt across the middle of Ohio with a good share of beautiful farmland.

It sounds like you are really liking the idea of owning a farm and played right, I think that might possibly have some tax advantages, too. (But I really don't know anything about how taxes and/or incentives can work for farms. But I am sure you can find out.)

I am not sure you are going to have to pay as much as $70,000ish in taxes. Like I said earlier, get a CPA who knows about this stuff. The annuity has your money imprisoned. You want to spring it. Find out the best plan for how to do that.

Happy growing -- whatever it is. :)

Boomer

PS: To my fellow Ohioan -- and don't fall for any of those investment guys who want to buy you dinner first.

[ML Smith]

Find a good investment/financial advisor and get a couple of opinions. Don’t necessarily take the first one. Compare and make your decisions from there.

[Mrprez]

Yes it is. I’ve had it for over four years now.

[JoelJohnson]

Yeah, I've read that the market is suppose to take a dive. Banks removing lines of credit etc. I'll probably take lump sum if only have to pay $30000 in taxes.

Depends on your time frame (never try to time the market, the market can stay irrational longer that you can stay solvent).

Talk to a financial accountant to figure out how to avoid paying too much in taxes.

[Gigi3000]

Is that bridge in central ohio?

[Gigi3000]

I work in the insurance/investment world. Because of the SECURE Act and that it is a Inherited annuity you will have 2 options.
If it was an IRA account you have 10 years to pay the taxes you decide how all now, a little each year, or all at once at the end of the 10 years.
If it was non-IRA, you have up to 5 years to pay the taxes either all now or equally over 5 years.
No matter what it is taxable ordinary income and your tax rate that goes with it.
If you have no current taxable income as you mentioned it would make much more sense to liquidate it over time and pay at lower tax rates as this would be your only income.

This is what I don't understand. It's not an IRA but the bank advisor said with Lincoln Advantage Variable Index Fund I can pick the number of years to spread it over? They downplayed the 5 year option to keep with with Nationwide, said it Is an older policy....

[Gigi3000]

Because I'd like to not sound like a complete idiot when I talk to them. Sounding like an idiot anonymously is so much better

[retiredguy123]

This is what I don't understand. It's not an IRA but the bank advisor said with Lincoln Advantage Variable Index Fund I can pick the number of years to spread it over? They downplayed the 5 year option to keep with with Nationwide, said it Is an older policy....
It's pretty simple. The bank advisor wants you to move the money to another annuity so he can make a large commission. Even if you spread the income over several years, you will still pay the tax. You may save a small amount in taxes by delaying the income, but you will also save money by avoiding the annuity fees and other restrictions.

I would suggest that you ask the bank advisor to give you a copy of the "entire" annuity contract, not the sales brochure. He will probably refuse to provide it. But, if he does give it to you, it will be a very large document that you will not understand. I have never been able to get an annuity salesperson to provide the contract they are trying to sell. I had one hang up on me when I asked. Their sales policy is to make you buy it before you can read it. Absurd.

[CoachKandSportsguy]

there are two points of view in this type of financial decision

TAX MINIMIZATION and INCOME MAXIMIZATION

USA a CPA/tax expert for the tax minimization. Most CPA's primary goal is to minimize taxes on events which may or have happened. Minimizing taxes is good, but can be counter productive to future income or investments. ie, you can pay 27% in taxes, and lose the 27% in asset pricing, and still have to pay tax if you sell, so tax planning is strictly a tax minimizing exercise. . .

Income generation is the opposite exercise of tax minimization, which is the strength of a CFP, or other financial planner. both have consequences, one has a longer term implications to your quality of life, the other doesn't

either way, the net effect is increased financial assets and security, since it came from an outside entity, so the total just adds to your current pile of financial assets. . .

good luck, but keep the perspective of who does what and how to use them together.

corporate finance guy

[cduffield]

I have been a CFP since 1982 and we deal with this constantly. There are several factors to consider: taxes, risk tolerance, personal needs, and inheritance to name a few. My partner and I will be at the Baby Boomer Expo in September and we are setting up an office in the Villages soon. Feel free to contact me anytime to review options. Cliff Duffield

[DPauly]

Talk to Parady Financial. We have FIXED index annuities and love them....as do many others. Parady will teach you about them. It costs nothing to listen.

[Aces4]

I would hope by this time you are having a good laugh at all the, “ give me your money” and I’ll make you rich...

Keep in mind that if our government hadn’t tampered with the economy by printing funny money, created practically free money to borrow thus removing any profit from CDs to push money into the failing stock market, it would have all collapsed during the second Great Depression, oops... Great Recession. Our country is living in a house of straw and owning property is like having a house built with bricks.

[dewilson58]

there are two points of view in this type of financial decision TAX MINIMIZATION and INCOME MAXIMIZATION

USA a CPA/tax expert for the tax minimization. Most CPA's primary goal is to minimize taxes on events which may or have happened. Minimizing taxes is good, but can be counter productive to future income or investments.

Ouch, that hurt.
As a guy with plenty of C's, the goal is to Maximize After Tax Net Worth.
:ho:

[Gigi3000]

Sorry, gains from annuities are taxed as ordinary income not capital gains. If you have no other taxable income, your gain of $40,000 would be reduced by the standard deduction - $12,550 - leaving $27,450 as taxable income. The tax on $27,450 for a single person, under age 65, is roughly $3,000.

I am no longer licensed to give investment advice. From a tax standpoint and that you need income it might be a good idea to surrender the annuity and find a vehicle to provide some annual income.

Fred Jacobs
Expert Tax Prep

Where do you get a gain of $40000?

[Ghat724@gmail.com]

Long term capital gains are taxed at 15%, isn't it? Don't pay taxes look for tax deferred, but stay out of the stock market. Or split it up and put parts if it in different investment vehicles!

[dewilson58]

Gigi3000...........Pull up your stakes & get out of this thread. The nuts have arrived.

:duck:

[gpk111]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70......

[gpk111]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...

Assumed fact pattern: You have inherited an annuity worth $360k with a $160k basis, so $200k is taxable. $160k is not taxable, assuming there is no estate tax.

Discussion #1: IMMEDIATE CASH. Take the tax hit and open bank account. Earn 0.5%. Complete safety. Tax hit is $200k times your incremental tax bracket. Maybe 15-20% if you have no base income. $200kX15% = $30k. $200X20%=$40k. Your arithmetic sounds off. Probably because you are not factoring in the non-taxable $160k. Annuity inheritances are taxed as ordinary income, not capital gains.

Discussion #2: CONSIDER PAYMENT OPTIONS. Talk to the existing insurance company and ask what your options are as a non-spousal beneficiary. You'll most likely find these options:
1. Cash (see above)
2. Partial payments not to stretch past 5 years if non-qualified and 10 years if qualified (this levels your taxes, since payments include both basis and earnings)
3. Possibly a conversion to an annuity which buys you lifetime income (Usually bad deals even if available to beneficiaries). Probably not available prior to paying taxes. Long shot, but worth asking about.

Discussion #3: CASH INVESTMENTS. Assuming you took the cash and paid the taxes, you are now facing investment decisions for the cash ($360k less say $40k of taxes = $320k). You can invest in stocks, bonds, annuities, or whatever you want, and none of those care what the source of your cash is. You can read thousands of threads on investments. Or you can consider Willie Nelson's philosophy: " I spend most of my money on whiskey and women.... and wasted the rest!" But I digress.
The point is that the source of your windfall has ABSOLUTELY NOTHING to do with your investment decision. The guy trying to sell you an annuity is confusing the issue. If YOU owned the annuity, you could roll it into another annuity via a 1035 exchange, but there is no way an inherited annuity can be transferred to you without paying taxes.

Discussion#4: MERITS OF ANNUITIES. I have done a lot of work on comparing annuities vs equity investments. I have opted for both. There are a lot of different annuity types. A pension is a type of annuity. So is a variable annuity with fees up to 4%. Don't listen to those who tell you to run as soon as you hear "annuities." Also don't listen to those who try to sell you annuities without explaining all the questions you may have or don't know to ask. ...and run from advisors who don't understand basic taxation law as it applies to inherited annuities.

PS If you're reasonably healthy, wait until 72 to tap your Social security, especially since you're got your inherited cash to fall back on.

[Gigi3000]

Assumed fact pattern: You have inherited an annuity worth $360k with a $160k basis, so $200k is taxable. $160k is not taxable, assuming there is no estate tax.

Discussion #1: IMMEDIATE CASH. Take the tax hit and open bank account. Earn 0.5%. Complete safety. Tax hit is $200k times your incremental tax bracket. Maybe 15-20% if you have no base income. $200kX15% = $30k. $200X20%=$40k. Your arithmetic sounds off. Probably because you are not factoring in the non-taxable $160k. Annuity inheritances are taxed as ordinary income, not capital gains.

Discussion #2: CONSIDER PAYMENT OPTIONS. Talk to the existing insurance company and ask what your options are as a non-spousal beneficiary. You'll most likely find these options:
1. Cash (see above)
2. Partial payments not to stretch past 5 years if non-qualified and 10 years if qualified (this levels your taxes, since payments include both basis and earnings)
3. Possibly a conversion to an annuity which buys you lifetime income (Usually bad deals even if available to beneficiaries). Probably not available prior to paying taxes. Long shot, but worth asking about.

Discussion #3: CASH INVESTMENTS. Assuming you took the cash and paid the taxes, you are now facing investment decisions for the cash ($360k less say $40k of taxes = $320k). You can invest in stocks, bonds, annuities, or whatever you want, and none of those care what the source of your cash is. You can read thousands of threads on investments. Or you can consider Willie Nelson's philosophy: " I spend most of my money on whiskey and women.... and wasted the rest!" But I digress.
The point is that the source of your windfall has ABSOLUTELY NOTHING to do with your investment decision. The guy trying to sell you an annuity is confusing the issue. If YOU owned the annuity, you could roll it into another annuity via a 1035 exchange, but there is no way an inherited annuity can be transferred to you without paying taxes.

Discussion#4: MERITS OF ANNUITIES. I have done a lot of work on comparing annuities vs equity investments. I have opted for both. There are a lot of different annuity types. A pension is a type of annuity. So is a variable annuity with fees up to 4%. Don't listen to those who tell you to run as soon as you hear "annuities." Also don't listen to those who try to sell you annuities without explaining all the questions you may have or don't know to ask. ...and run from advisors who don't understand basic taxation law as it applies to inherited annuities.

PS If you're reasonably healthy, wait until 72 to tap your Social security, especially since you're got your inherited cash to fall back on.

How are you calculating the taxes again(on lump sum withdrawal)? What does the $160000 cost basis have to do with it? Cost basis was already taxed, right?

[gpk111]

How are you calculating the taxes again(on lump sum withdrawal)? What does the $160000 cost basis have to do with it? Cost basis was already taxed, right?

Correct. Cost basis is not taxed. Gains on annuities are taxed as ordinary income.

[Gigi3000]

Don’t worry about what the agent makes. Look for principal protection, low taxes on gains and if it meets youvr goals.

Apparently there's no low taxes on gains in annunities. Taxed at ordinary tax rate.

[joshgun]

Really? I don't know alot about taxes but I looked at the tax table for that amount and I saw 37%. There definitely is no other income. I sold a condo and am living off those proceeds. Thanks for your info

First, annuity income is ordinary income not a capital gain. Second, some amounts principal are excluded from income. Third, a quick google search shows three options, lump sum, distribution over 5 years or annuitizies amount over your remaining life. I don’t like annuities but from a tax standpoint this may be your best option. However, I think your first step like others have said is find a fee only planner. They can lay out your options and show you the risk/reward for each option with the tax impact.

[JustRita]

You need a fiduciary Financial Advisor. Flat fee.

[Cheryl Barrios]

I'm 63, cost basis $160000, gain $200000. Bank advisor offered indexed variable annunity, 10 year spread. Anyone familiar with these? I have no experience with annunities. Trying to figure out whether to take lump sum and just pay the $70000 tax bill or do the annunity. If I take the annunity I'd put it into index mutual funds. My situation is very simple...I have no income, lots of savings, no mortgage on home, no tax deductions. If take annunity, goal.would be income I guess. Not taking social security, maybe take at 65.or wait until 70...

Just making sure I understand this correctly, you have stock and the cost basis was $160,000; your gain was $200,000; so the value of the stock right now is $3i60,000 - correct. I think you taxes on a $200,000 gain with no income your gain would be taxed at 15% or $30,000 - not $70,000. If I'm misunderstanding and the current value is $200,00 - your gain would only be $40,000 and your tax - $6,000.

Either way, I would not get an annuity. Keep it in stock and don't cash it in all at once. Cash the newest - as long as you've had it at least a year. Only take out what you need AND only pay the tax on what you take out. If you're playing it safe because you made a lot of money in a short period of time and it's at least a one year investment - take it out, pay the tax, and thank the powers that be for the big gain.

[Gigi3000]

It's pretty simple. The bank advisor wants you to move the money to another annuity so he can make a large commission. Even if you spread the income over several years, you will still pay the tax. You may save a small amount in taxes by delaying the income, but you will also save money by avoiding the annuity fees and other restrictions.

I would suggest that you ask the bank advisor to give you a copy of the "entire" annuity contract, not the sales brochure. He will probably refuse to provide it. But, if he does give it to you, it will be a very large document that you will not understand. I have never been able to get an annuity salesperson to provide the contract they are trying to sell. I had one hang up on me when I asked. Their sales policy is to make you buy it before you can read it. Absurd.

I was wondering what the terminology was for what I needed. Entire annunity contract. I'll see about getting that and maybe take it to my CFP

[Gigi3000]

I work in the insurance/investment world. Because of the SECURE Act and that it is a Inherited annuity you will have 2 options.
If it was an IRA account you have 10 years to pay the taxes you decide how all now, a little each year, or all at once at the end of the 10 years.
If it was non-IRA, you have up to 5 years to pay the taxes either all now or equally over 5 years.
No matter what it is taxable ordinary income and your tax rate that goes with it.
If you have no current taxable income as you mentioned it would make much more sense to liquidate it over time and pay at lower tax rates as this would be your only income.

It's a non-IRA annunity. Do you know if the 5 year thing is just stretching the amount in the existing annunity or if I would need to take out a whole new annunity?

[Eg_cruz]

Ask what the fees are and penalty if you take the money out of the new annuity in a year or two. I do not think you will like the answer.
I think you want to look for someone to help you make a choice. I would try a few CPA firms since they do not sell annuities and ask that the person works with annuities as they probably do not for most.
An immediate annuity is what you want for minimum cost and maximum payout to you.
You mentioned the work bank. In my opinion never buy investments from a bank. Annuities should not be sued as an investment.
Shop around for an immediate annuity and let the salesman tell you what is wrong with the proposed annuity. If you want monthly income then go for the immediate annuity.
If you go for an immediate annuity let the selling company transfer the old annuity from that company to you. You do not want to get any of the proceeds as it could cost you taxes.
If you want to cash out you can probably take out what ever dollars you want. Could spread over several years. Note the first 200000 will be taxed as income and your income will be a lot higher so your tax bracket will also be high. You could have say 25 to 30% Federal tax (guess) plus state tax.
You have a good start researching before you start talking to professionals.
Disagree immediate annuities are not paying anything…….just put the money in the bank and get better interest

[Eg_cruz]

Parady Financial has hundreds of clients here in The Villages. You really should talk to them before making a decision.
That one I would stay away from…..far away

[rjm1cc]

Disagree immediate annuities are not paying anything…….just put the money in the bank and get better interest

I mentioned it in case the OP wants security of monthly income, although not inflation protected, and low fees.

The benefit of an annuity is if you live until 110 you still get paid even though you long ago got all your money back. Thus your health should be considered.

You are correct that an annuity is not a good investment product but it can be good for those that want security and do not want to rely on investment results.

[gpk111]

Annuities can be a useful part of a portfolio. Statistically, they will not beat the raw market over the long term, since you pay for marketing and risk mitigation.

They are good for three things:
1. They beat CDs hands down. "MYGA" type product.
2. A pension type payment stream. You buy the security of not outliving your money. Withdrawing 4% annually from an equity account will not guarantee that, no matter what Ken Fischer (with whom I have accounts) says. "SPIA" or "FIA" with income provision
3. It can mitigate or eliminate downside market risk. The price you pay is reduced upside opportunity. "FIA"

Interesting to see the range of opinions. Some informed. Some not so much.

[retiredguy123]

Annuities can be a useful part of a portfolio. Statistically, they will not beat the raw market over the long term, since you pay for marketing and risk mitigation.

They are good for three things:
1. They beat CDs hands down. "MYGA" type product.
2. A pension type payment stream. You buy the security of not outliving your money. Withdrawing 4% annually from an equity account will not guarantee that, no matter what Ken Fischer (with whom I have accounts) says. "SPIA" or "FIA" with income provision
3. It can mitigate or eliminate downside market risk. The price you pay is reduced upside opportunity. "FIA"

Interesting to see the range of opinions. Some informed. Some not so much.
Your item number 3 is often misunderstood and not explained properly by the annuity salesperson. The downside market risk is only eliminated if the market is lower over the entire cumulative time period that you own the annuity. Many people think that, if the market goes down 25 percent in one year, they don't lose money that year. But, it is not calculated on a yearly basis. So, if you own the annuity for 20 years, the only way you benefit from the market downside guarantee is if the market is down over the entire 20 year period, which rarely happens. Also, paying management fees, surrender charges, etc. are not considered losing money.

[Gigi3000]

For those who like puzzles.....


Ok, I have decided to take it lump sum. Here's why. I don't like how shady these annunity companies are with giving out the annunity contract before hand for a complete review. It doesn't appear I'll pay more than $70,000 in taxes for 2021 year and maybe even less..and #3 is, I'm losing sleep over this and it's not worth it. And # 4 is, I have 403b inherited IRA($76,000, qualified) that the distribution has all ready been taken for 2021 so I can cash it out in 2022. I
appreciate everyone's input....I would rather live frugally to make up any loss than deal with wondering what they're doing to my money.

[Boomer]

For those who like puzzles.....


Ok, I have decided to take it lump sum. Here's why. I don't like how shady these annunity companies are with giving out the annunity contract before hand for a complete review. It doesn't appear I'll pay more than $70,000 in taxes for 2021 year and maybe even less..and #3 is, I'm losing sleep over this and it's not worth it. And # 4 is, I have 403b inherited IRA($76,000, qualified) that the distribution has all ready been taken for 2021 so I can cash it out in 2022. I
appreciate everyone's input....I would rather live frugally to make up any loss than deal with wondering what they're doing to my money.


I know exactly what you mean in that last sentence. Some of us are not wired to own annuities. I know I'm not. Heck, I am not even wired to be able to stand to hire a financial advisor. . .

(Believe you me, I sometimes wish I could make myself hire an advisor, but I have been making money decisions for so long that I cannot seem to turn over the reins. Maybe someday. I did find one that I have said I would use if my family notices that I am suddenly investing in Pound Puppies or Franklin Mint Plates or Pez Dispensers.)

But we do depend on a CPA to give us good advice on how to navigate through taxes. I hope you will talk with an accountant, too, before you make your final decision so you can get professional advice on how to best handle the taxes while getting your money out.

I am linking an article here from Kiplinger that you might find interesting -- especially the part about the flexibility of the stretch. If you think this article could help, may I suggest that you print it and run it past an accountant.

Kiplinger, in general, is pretty good at synthesizing information into short articles which can be, at least, a starting point. The article could be worth a look and a conversation with the accountant to find out if she thinks you are really going to need to owe as much as $70,000 in income tax.


Inheriting an Annuity? Stretch Its Tax Benefits | Kiplinger (https://www.kiplinger.com/article/retirement/t003-c032-s014-inheriting-an-annuity-stretch-its-tax-benefits.html)

Boomer

[retiredguy123]

For those who like puzzles.....


Ok, I have decided to take it lump sum. Here's why. I don't like how shady these annunity companies are with giving out the annunity contract before hand for a complete review. It doesn't appear I'll pay more than $70,000 in taxes for 2021 year and maybe even less..and #3 is, I'm losing sleep over this and it's not worth it. And # 4 is, I have 403b inherited IRA($76,000, qualified) that the distribution has all ready been taken for 2021 so I can cash it out in 2022. I
appreciate everyone's input....I would rather live frugally to make up any loss than deal with wondering what they're doing to my money.
Good decision. And, I think your tax will actually be less than $70K.

[Aces4]

For those who like puzzles.....


Ok, I have decided to take it lump sum. Here's why. I don't like how shady these annunity companies are with giving out the annunity contract before hand for a complete review. It doesn't appear I'll pay more than $70,000 in taxes for 2021 year and maybe even less..and #3 is, I'm losing sleep over this and it's not worth it. And # 4 is, I have 403b inherited IRA($76,000, qualified) that the distribution has all ready been taken for 2021 so I can cash it out in 2022. I
appreciate everyone's input....I would rather live frugally to make up any loss than deal with wondering what they're doing to my money.


Great decision and never underrate a good night’s rest, sleep well!

[retiredguy123]

For those posters who recommend Parady Financial. They sell annuities. Why won't they provide a copy of the annuity contract that they are selling? I have called them several times and tried to just get a copy of the contract to review, but they will not provide it. Apparently, you have to pay them the money, sign the contract, and then they will send you the contract. Personally, I would prefer to read a contract before I decide to pay money and sign it. But, maybe that is just me.

[Gigi3000]

I know exactly what you mean in that last sentence. Some of us are not wired to own annuities. I know I'm not. Heck, I am not even wired to be able to stand to hire a financial advisor. . .

(Believe you me, I sometimes wish I could make myself hire an advisor, but I have been making money decisions for so long that I cannot seem to turn over the reins. Maybe someday. I did find one that I have said I would use if my family notices that I am suddenly investing in Pound Puppies or Franklin Mint Plates or Pez Dispensers.)

But we do depend on a CPA to give us good advice on how to navigate through taxes. I hope you will talk with an accountant, too, before you make your final decision so you can get professional advice on how to best handle the taxes while getting your money out.

I am linking an article here from Kiplinger that you might find interesting -- especially the part about the flexibility of the stretch. If you think this article could help, may I suggest that you print it and run it past an accountant.

Kiplinger, in general, is pretty good at synthesizing information into short articles which can be, at least, a starting point. The article could be worth a look and a conversation with the accountant to find out if she thinks you are really going to need to owe as much as $70,000 in income tax.


Inheriting an Annuity? Stretch Its Tax Benefits | Kiplinger (https://www.kiplinger.com/article/retirement/t003-c032-s014-inheriting-an-annuity-stretch-its-tax-benefits.html)

Boomer

The 5 year rule sounds like I keep the SAME annunity and take the $360,000 any time over 5 years. So I could skip a year and not take any? There is no new annunity I need to worry about figuring out?

[retiredguy123]

The 5 year rule sounds like I keep the SAME annunity and take the $360,000 any time over 5 years. So I could skip a year and not take any? There is no new annunity I need to worry about figuring out?
If you can use the 5 year rule, you could take $72K per year for 5 years, and have a taxable income of $40K each year. That may save you some taxes over the 5 years because of the standard deduction. Then, you would be done with the annuity.

[Gigi3000]

If you can use the 5 year rule, you could take $72K per year for 5 years, and have a taxable income of $40K each year. That may save you some taxes over the 5 years because of the standard deduction. Then, you would be done with the annuity.

The bank advisor didn't even explain the 5 year thing. She just said she didn't recommend it.

[retiredguy123]

The bank advisor didn't even explain the 5 year thing. She just said she didn't recommend it.
The only reason she didn't recommend it is because she wants you to transfer the money into another annuity so she can make a large commission. Annuity commissions are huge.

[Aces4]

If you can use the 5 year rule, you could take $72K per year for 5 years, and have a taxable income of $40K each year. That may save you some taxes over the 5 years because of the standard deduction. Then, you would be done with the annuity.

And remember at the current rate of inflation how much less those dollars will buy each year.

[macawlaw]

Another possibility - Do you support any charities? You could donate the asset to a charity, get a tax deduction for the full appreciated amount (thus avoiding any capital gains tax), and still get a lifetime annuity. At your death, the charity gets the money. Your gift could be restricted as to how it could be used. For example, you could have a scholarship named for you at your alma mater.

[Gigi3000]

If you can use the 5 year rule, you could take $72K per year for 5 years, and have a taxable income of $40K each year. That may save you some taxes over the 5 years because of the standard deduction. Then, you would be done with the annuity.

I talked to the bank advisor who said I would keep the same annunity (which is.in a balanced fund 60/40) but they are checking if it has an exclusion ratio. If not, I would have to pay taxes on the whole $360,000( over 5 years)....no benefit of cost basis. How can they sell something like that?

[retiredguy123]

I talked to the bank advisor who said I would keep the same annunity (which is.in a balanced fund 60/40) but they are checking if it has an exclusion ratio. If not, I would have to pay taxes on the whole $360,000( over 5 years)....no benefit of cost basis. How can they sell something like that?
That doesn't sound correct. If the person you inherited the annuity from had a non-taxable cost basis, you should have the same cost basis. I would get an opinion from an experienced tax preparer. Also, if the person who purchased the annuity had an accountant or tax preparer, I would contact them. They should have maintained a record of the annuity cost basis. When you purchase any investment that has a cost basis, it is your responsibility to maintain records to prove to the IRS that you have a cost basis when you sell the investment. Sometimes, those records can go back decades.

[retiredguy123]

I talked to the bank advisor who said I would keep the same annunity (which is.in a balanced fund 60/40) but they are checking if it has an exclusion ratio. If not, I would have to pay taxes on the whole $360,000( over 5 years)....no benefit of cost basis. How can they sell something like that?
One other thing. Your original post said the annuity had a cost basis of $160,000. If the inherited annuity was funded by transferring an IRA or other qualified retirement account with pre-tax dollars, then the cost basis could be taxable because the $160,000 came from an account that had never been taxed. In that case, you would be required to pay tax on the entire amount.

[CoachKandSportsguy]

When you purchase any investment that has a cost basis, it is your responsibility to maintain records to prove to the IRS that you have a cost basis when you sell the investment.

Although true, you are less likely to get an audit as long as you show reasonable taxable gains. And you only have to prove taxable gain basis if audited.

However, a CPA/Tax lawyer is your best source of tax minimizing choices, and that should be the next step after your decision to be sure that you get the most favorable tax treatment.

Depending upon the particulars of the situation, you have plenty of time to figure it out, but do the CPA tax lawyer NOW and don't wait until next year, as that is too late. . . as you will also want to make a quarterly payment after the distribution so that you don't get interest tacked on to your tax bill next year.

and its great to use this board to get generalized tax advice, but not at all good enough to file taxes properly for the particulars of your situation :ohdear: :ohdear: :ohdear: :blahblahblah: :blahblahblah: :blahblahblah:

[gpk111]

Fascinating thread. Sounds like Gigi (OP) is learning a lot. Yes, we move from "earning and accumulating" to "sleeping well at night." In Gigi's case, maybe the main driver is not age, but just predisposition and an aversion to annuities !:)

..and thanks, Gigi, for sharing your tentative decision. Financial decisions, I'm learning are often (usually?) driven by emotion, rather than financial logic. Took me a while to learn after many years of education and spending most of my former lives doing the latter! :)

To the substance:
- 60/40 split will not guarantee the money will be available as you envision it. It's subject to volatility, up or down. There may be other, more predictable (fixed) options available within that annuity.
- There will be tax savings if you take the money out over time.
- The bank (and IRS) has to recognize the basis as non-taxable money. The nuance is how it's recognized. When you make a partial withdrawal from an annuity, gains come out first. Gains are 100% taxable at ordinary income rates. After all gains are accounted for, you get the basis, which is not taxable.

In a predetermined payout (as opposed to owner dictated random withdrawals descibed above), the taxable and non-taxable amounts are often both paid over time, so that each payment has a taxable and non-taxable component. The ratio of non-taxable to taxable is called an exclusion ratio.

It sounds like what the bank person is saying is that she doesn't know which scenario applies. Should be easy to find out before you decide anything. The differences will be smaller compared to the overall savings you'll achieve by taking the inheritance over time.

Forget the proposal to buy another annuity. That just confuses the question. It's a whole different topic and bears no relation to your withdrawal decision. As many have pointed out, that's an investment decision for the money after it's in your bank account.

[gpk111]

Retired guy: Transferring an annuity is done with a 1035 exchange. That exchange will carry the basis from the prior account. It's up to the owner to make sure that happened correctly. According to OP, the basis was identified, so no problem!?

[Gigi3000]

Although true, you are less likely to get an audit as long as you show reasonable taxable gains. And you only have to prove taxable gain basis if audited.

However, a CPA/Tax lawyer is your best source of tax minimizing choices, and that should be the next step after your decision to be sure that you get the most favorable tax treatment.

Depending upon the particulars of the situation, you have plenty of time to figure it out, but do the CPA tax lawyer NOW and don't wait until next year, as that is too late. . . as you will also want to make a quarterly payment after the distribution so that you don't get interest tacked on to your tax bill next year.

and its great to use this board to get generalized tax advice, but not at all good enough to file taxes properly for the particulars of your situation :ohdear: :ohdear: :ohdear: :blahblahblah: :blahblahblah: :blahblahblah:

LOL..right.im working on getting CPA now. I have a fee only CFP picked out, but they're hard to find. I feel more energized today

[Gigi3000]

Retired guy: Transferring an annuity is done with a 1035 exchange. That exchange will carry the basis from the prior account. It's up to the owner to make sure that happened correctly. According to OP, the basis was identified, so no problem!?


The bank said it had cost basis of $160000 and that usually no tax on that. Except if I go with the 5 year thing, if there's no exclusion ratio, I'd be taxed on the whole $360000.They're checking that now. If I'm taxed on the whole thing, then I'd do a lump sum

[gpk111]

The bank said it had cost basis of $160000 and that usually no tax on that. Except if I go with the 5 year thing, if there's no exclusion ratio, I'd be taxed on the whole $360000.They're checking that now. If I'm taxed on the whole thing, then I'd do a lump sum

No way anyone can tax you on the entire $360k. Please re-read my prior post differentiating non-taxable payouts from exclusion ratios. Sounds like the bank is pursuing the wrong question or they're miscommunicating to you.

Anxious to hear more! :popcorn:

[Boomer]

Gigi, I love this answer you gave for those who kept saying you should not be asking strangers on the internet for financial advice. . .

Because I'd like to not sound like a complete idiot when I talk to them. Sounding like an idiot anonymously is so much better

You are definitely not an idiot. Idiots do not ask questions. Idiots act like they know everything.

Of course, ‘anonymously’ is the operative word. You have been getting some decent information here that can help to equip you with a working vocabulary, along with your questions, for when you have those in-person conversations with those you need to talk to. (I do not think that bank advisor has your best interests in mind.)

If you and your accountant decide a stretch will work, another factor to consider is that you will reach Medicare age soon. When you are on Medicare, if you receive a big influx of income, it could raise your AGI to the number that causes IRMAA to kick in.

IRMAA is the acronym for Income-Related Monthly Adjustment Amount. If your AGI crosses the IRMAA threshold, two years after that, you will have to pay more for your Medicare Part B and/ or Part D for that year.

IRMAA is based on AGI, not taxable income, and it is an either/or scenario with no adjustment for how far in your AGI gets to triggering the increase.

This might not be significant in your situation, but you might want to ask the accountant to factor it in to find out. If taking the stretch, it could be worth adjusting the timeline. But it might not make a difference worth considering. Be aware, just in case. At least you would not be surprised if a premium increase shows up two years after an increase in AGI.

(IRMAA catches people sometimes who have to take a big chunk of change from their IRAs due to their RMD. Using a QCD as a part of the RMD can help in some situations. . .uh, oh, I digress. . .I do not know what in the hell is the matter with me. . .That was extraneous information. . .I cannot figure out why I like to talk about taxes???)

Anyway, I am happy to see that you are so much better ready to handle this. Anonymous questions can work out well. People who ask questions can be helped by getting answers to weigh and explore further. Those answers, sent anonymously from this end, are showing you what your further questions need to be.

(This really is an interesting thread, both about money and the psychology that can surround it.)

Boomer

[Two Bills]

Gigi, I love this answer you gave for those who kept saying you should not be asking strangers on the internet for financial advice. . .
You are definitely not an idiot. Idiots do not ask questions. Idiots act like they know everything.

Of course, ‘anonymously’ is the operative word. You have been getting some decent information here that can help to equip you with a working vocabulary, along with your questions, for when you have those in-person conversations with those you need to talk to. (I do not think that bank advisor has your best interests in mind.)

If you and your accountant decide a stretch will work, another factor to consider is that you will reach Medicare age soon. When you are on Medicare, if you receive a big influx of income, it could raise your AGI to the number that causes IRMAA to kick in.

IRMAA is the acronym for Income-Related Monthly Adjustment Amount. If your AGI crosses the IRMAA threshold, two years after that, you will have to pay more for your Medicare Part B and/ or Part D for that year.

IRMAA is based on AGI, not taxable income, and it is an either/or scenario with no adjustment for how far in your AGI gets to triggering the increase.

This might not be significant in your situation, but you might want to ask the accountant to factor it in to find out. If taking the stretch, it could be worth adjusting the timeline. But it might not make a difference worth considering. Be aware, just in case. At least you would not be surprised if a premium increase shows up two years after an increase in AGI.

(IRMAA catches people sometimes who have to take a big chunk of change from their IRAs due to their RMD. Using a QCD as a part of the RMD can help in some situations. . .uh, oh, I digress. . .I do not know what in the hell is the matter with me. . .That was extraneous information. . .I cannot figure out why I like to talk about taxes???)

Anyway, I am happy to see that you are so much better ready to handle this. Anonymous questions can work out well. People who ask questions can be helped by getting answers to weigh and explore further. Those answers, sent anonymously from this end, are showing you what your further questions need to be.

(This really is an interesting thread, both about money and the psychology that can surround it.)

Boomer

IRMMA's, RMD's, IRA's QCD's, AGI's!!
It's very complicated being an American with a few bob in the bank.
Much simpler here in UK.
We have it all in cash, hide it under the bed, and plead poverty!:icon_wink:

[retiredguy123]

Retired guy: Transferring an annuity is done with a 1035 exchange. That exchange will carry the basis from the prior account. It's up to the owner to make sure that happened correctly. According to OP, the basis was identified, so no problem!?
I agree along as long the owner paid taxes on the $160,000 cost basis.

[retiredguy123]

No way anyone can tax you on the entire $360k. Please re-read my prior post differentiating non-taxable payouts from exclusion ratios. Sounds like the bank is pursuing the wrong question or they're miscommunicating to you.

Anxious to hear more! :popcorn:
I agree. If taxes were paid on the $160K, I don't think it matters whether you take a lump sum or over 5 years, you shouldn't owe taxes on money that has already been taxed.

I also agree that the bank advisor is either confused or not explaining the issue correctly.

[Stu from NYC]

IRMMA's, RMD's, IRA's QCD's, AGI's!!
It's very complicated being an American with a few bob in the bank.
Much simpler here in UK.
We have it all in cash, hide it under the bed, and plead poverty!:icon_wink:

Not a good idea hiding it under the bed, sometimes people look there. Better to hide it under the mattress.

[lindaelane]

My thoughts exactly. I'm hoping real estate prices will drop a little although Dave Ramsey says they won't.
OK, you respect Dave Ramsey.

He has financial advisors who work with him that you can work with. You could find them by using google I think.

Its find to listen to what your peers have to say - others, stop being mean to Gigi about this. In the end though, you will need a professional. Make sure they are a fiduciary.

It is very difficult to find a financial advisor who will recommend annuities along with other investments. Usually, if they recommend annuities that is all they recommend. That is because annuities are an insurance product. Licensing is different. You do not need to be a fiduciary to sell annuities, but of course you would refuse to work with any financial advisor who is not a fiduciary.

At any rate, Dave Ramsey is sensible and out to be able to help you find someone. Just try to find someone who can help you evaluate whether or not an annuity is right for you. They are right for some - the one I have is very, very right for me - so do not listen to those who tell you they are always bad. But they are very complex and it is difficult to find one that is right for you.

[CoachKandSportsguy]

Not a good idea hiding it under the bed, sometimes people look there. Better to hide it under the mattress.

True story:

When had out lifestyle visit, we had no idea that we would be buying a house, and so the deposit was $10K, and we actually had $10K under our mattress back in New England, no $10K in any bank account which we could go to here in FL, and so it was a series of wire transfers from fidelity. . .

however, since we had never been to TV, we were unaware of the Fido branch here in TV, which would have made it a whole lot easier to put down the required amount.

but we made it in time

[Gigi3000]

No way anyone can tax you on the entire $360k. Please re-read my prior post differentiating non-taxable payouts from exclusion ratios. Sounds like the bank is pursuing the wrong question or they're miscommunicating to you.

Anxious to hear more! :popcorn:

Ok! Bank called. They were checking on the 5 year withdrawal.. There is no exclusion ratio. THIS time she said " that means you are paid out the gains FIRST, THEN the principal." So first 3 years or so I would have to pay taxes on all the full withdrawal(assuming equal amount withdrawals each year) then the last 2 years tax free. I swear she said earlier that I wouldn't get any tax benefit...
So I have CPA number so will get that set up...ty!!

[CoachKandSportsguy]

:a040:
:MOJE_whot:
:clap2:
:mademyday:

OK, now when you are meeting with the CPA, i want you to go through this thread with the CPA and have the CPA rate everyone's advice . . . on a scale from 1-3

3 - Could have been a CPA in a prior life
2 - Could be anybody who knows how to google
1 - You need to mute this person

:popcorn:
Then you need to publish the rating, I want to know how Retiredguy123 :BigApplause: was rated by the CPA. He has been on his financial planning game lately. . .


:duck:
Finance guy

[Gigi3000]

Thanks everyone!!! Things are more clear now!!!!!!

[Gigi3000]

:a040:
:MOJE_whot:
:clap2:
:mademyday:

OK, now when you are meeting with the CPA, i want you to go through this thread with the CPA and have the CPA rate everyone's advice . . . on a scale from 1-3

3 - Could have been a CPA in a prior life
2 - Could be anybody who knows how to google
1 - You need to mute this person

:popcorn:
Then you need to publish the rating, I want to know how Retiredguy123 :BigApplause: was rated by the CPA. He has been on his financial planning game lately. . .


:duck:
Finance guy


LOL....Will do! ;)

[Gigi3000]

Gigi, I love this answer you gave for those who kept saying you should not be asking strangers on the internet for financial advice. . .



You are definitely not an idiot. Idiots do not ask questions. Idiots act like they know everything.

Of course, ‘anonymously’ is the operative word. You have been getting some decent information here that can help to equip you with a working vocabulary, along with your questions, for when you have those in-person conversations with those you need to talk to. (I do not think that bank advisor has your best interests in mind.)

If you and your accountant decide a stretch will work, another factor to consider is that you will reach Medicare age soon. When you are on Medicare, if you receive a big influx of income, it could raise your AGI to the number that causes IRMAA to kick in.

IRMAA is the acronym for Income-Related Monthly Adjustment Amount. If your AGI crosses the IRMAA threshold, two years after that, you will have to pay more for your Medicare Part B and/ or Part D for that year.

IRMAA is based on AGI, not taxable income, and it is an either/or scenario with no adjustment for how far in your AGI gets to triggering the increase.

This might not be significant in your situation, but you might want to ask the accountant to factor it in to find out. If taking the stretch, it could be worth adjusting the timeline. But it might not make a difference worth considering. Be aware, just in case. At least you would not be surprised if a premium increase shows up two years after an increase in AGI.

(IRMAA catches people sometimes who have to take a big chunk of change from their IRAs due to their RMD. Using a QCD as a part of the RMD can help in some situations. . .uh, oh, I digress. . .I do not know what in the hell is the matter with me. . .That was extraneous information. . .I cannot figure out why I like to talk about taxes???)

Anyway, I am happy to see that you are so much better ready to handle this. Anonymous questions can work out well. People who ask questions can be helped by getting answers to weigh and explore further. Those answers, sent anonymously from this end, are showing you what your further questions need to be.

(This really is an interesting thread, both about money and the psychology that can surround it.)

Boomer

Thanks Boomer! I'll definitely ask the CPA about the IRMAA thing!

[Boomer]

IRMMA's, RMD's, IRA's QCD's, AGI's!!
It's very complicated being an American with a few bob in the bank.
Much simpler here in UK.
We have it all in cash, hide it under the bed, and plead poverty!:icon_wink:


Two Bills, you always make me laugh. Nobody has mastered wit like the Brits.

About those abbreviations you hit back into my court — they came with a memory of another time when that happened to me. . .

I have a thing about wanting more women to get a handle on understanding the money in their lives — and I am not talking about the grocery budget.

Anyway, I was going to hear a speaker talking about women and money and retirement. My daughter Boomette is only 20 years younger than me so I thought it was definitely time for “the talk” because I wanted to make sure she knew the facts of money-life. I invited her to come with me and she asked if she could bring a friend. . .

I was thrilled to have two young career women wanting to know more about retirement planning, etc.

The talk was a good one. It even got so far as getting into handling RMDs. (My two guests were not even close to retirement age yet, just trying to plan for it.)

That was when Boomette’s friend slid a cocktail napkin over to me. On it, she had written, “RMD? QCD? WTF?”

Boomer