Inheriting non-spousal annunity

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  #1  
Old 08-17-2021, 10:22 AM
Gigi3000 Gigi3000 is offline
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Default Inheriting non-spousal annunity

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...
  #2  
Old 08-17-2021, 10:40 AM
retiredguy123 retiredguy123 is offline
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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.
  #3  
Old 08-17-2021, 10:46 AM
Aces4 Aces4 is offline
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I’d take the money, run and stay out of the stock market.
  #4  
Old 08-17-2021, 11:51 AM
Gigi3000 Gigi3000 is offline
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Quote:
Originally Posted by retiredguy123 View Post
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
  #5  
Old 08-17-2021, 11:54 AM
Stu from NYC Stu from NYC is offline
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I would talk to a fee only financial adviser.
  #6  
Old 08-17-2021, 11:58 AM
Gigi3000 Gigi3000 is offline
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Originally Posted by Aces4 View Post
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.
  #7  
Old 08-17-2021, 12:09 PM
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Buyer Beware: How Low Interest Rates Impact Annuities
  #8  
Old 08-17-2021, 12:19 PM
CoachKandSportsguy CoachKandSportsguy is offline
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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
  #9  
Old 08-17-2021, 01:09 PM
Gigi3000 Gigi3000 is offline
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[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.
  #10  
Old 08-17-2021, 01:13 PM
Stu from NYC Stu from NYC is offline
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[QUOTE=Gigi3000;1990445]
Quote:
Originally Posted by CoachKandSportsguy View Post
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?
  #11  
Old 08-17-2021, 01:38 PM
Gigi3000 Gigi3000 is offline
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Quote:
Originally Posted by retiredguy123 View Post
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?
  #12  
Old 08-17-2021, 01:41 PM
Gigi3000 Gigi3000 is offline
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[QUOTE=Stu from NYC;1990449]
Quote:
Originally Posted by Gigi3000 View Post

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
  #13  
Old 08-17-2021, 01:48 PM
retiredguy123 retiredguy123 is offline
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Originally Posted by Gigi3000 View Post
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.

Last edited by retiredguy123; 08-17-2021 at 01:55 PM.
  #14  
Old 08-17-2021, 01:56 PM
Gigi3000 Gigi3000 is offline
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Quote:
Originally Posted by retiredguy123 View Post
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??
  #15  
Old 08-17-2021, 02:13 PM
retiredguy123 retiredguy123 is offline
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Quote:
Originally Posted by Gigi3000 View Post
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.
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