Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Will annuities be pushed off the fiscal cliff?
Old 12-19-2012, 02:59 AM   #1
Thinks s/he gets paid by the post
obgyn65's Avatar
 
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
Will annuities be pushed off the fiscal cliff?

"As negotiations in the nationís capital heat up over how to reform the tax code, lower the deficit and avert a plunge off the so-called fiscal cliff, might the tax-deferred status of annuities be rescinded?"

Will annuities be pushed off the fiscal cliff? | LifeHealthPro

I just started to buy deferred annuities this year...
__________________

__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
obgyn65 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-19-2012, 06:20 AM   #2
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,406
Oby, I have no idea if this is more or less likely than any other tax measure. Typically, though, tax measures are not retroactive in the US, so if this were to happen it would probably not affect annuities that have been created, only new investments.
__________________

__________________
MichaelB is offline   Reply With Quote
Old 12-19-2012, 07:47 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,396
That and the insurance industry, agents and customers are a hugely powerful lobby who would fight tooth and nail to keep the tax deferred status of annuities and life insurance. I would handicap it at 2% at most.

That said, today's deferred annuity products and some forms of life insurance (like UL) are so similar to bank products I'm not sure why they get special tax treatment. It made more sense in yesteryears for whole life and deferred annuities where the only exit option was endowment or annuitization.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 12-19-2012, 08:32 AM   #4
gone traveling
 
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,851
I assume life insurance (whole/term) are already paid for with taxed funds. Yes, the proceeds upon death are tax-free, but there is a portion that has been taxed. It's the same as an annuity purchased with non-qualified funds (e.g. non-TIRA money). In that case, each payment received upon starting the distribution is made of taxable and non-taxable funds. The part of the payment that has already been taxed is not taxed again.

As for annuity products (such as our SPIA), purchased with TIRA (qualified) funds, the monthly payments are 100% taxable at normal (current) rates. So the government(s) are getting their "pound of flesh" at one point in time, although not immediately.

If "they" want to start taxing the qualified money used to purchase an immediate/deferred annuity at the time the contract is struck, not at the time of distribution, then I would think the entire TIRA scenerio is at risk.

But what do I know? ... Just my musings on the thread.
__________________
rescueme is offline   Reply With Quote
Old 12-19-2012, 09:25 AM   #5
Thinks s/he gets paid by the post
growing_older's Avatar
 
Join Date: Jun 2007
Posts: 2,608
I've been pitched all sorts of insurance products over the years, and many of them had the property that they were relatively poor investments, but the tax advantages they enjoyed made them at least so-so. For investors with higher tax brackets than me, they actually started to look good.

This never made sense to me why such generous tax benefits should accrue to complicated tax dodging schemes simply because there was at least a minimal insurance component included.
__________________
growing_older is offline   Reply With Quote
Old 12-19-2012, 09:43 AM   #6
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 2,707
Quote:
Originally Posted by rescueme View Post
I assume life insurance (whole/term) are already paid for with taxed funds. Yes, the proceeds upon death are tax-free, but there is a portion that has been taxed.
Actually the proceeds of life insurance are supposed to be included in the total estate of the policy owner. You need to ask for a form 712 from the insurance companies. If the exemptiion goes down to $1 million it will become a bigger issue, today because of the $5 million exemption the estate tax is not an issue here.
__________________
meierlde is offline   Reply With Quote
Old 12-19-2012, 09:46 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,255
Quote:
Originally Posted by rescueme View Post
... then I would think the entire TIRA scenerio is at risk.
Everything is at risk. I often think the riskiest things are those that people consider low-risk. They may be deluding themselves, and that is very risky.

-ERD50
__________________

__________________
ERD50 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 03:50 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.