|
Cash in annuity when it matures?
01-27-2021, 07:50 AM
|
#1
|
Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,068
|
Cash in annuity when it matures?
DW has a 10 year annuity that matures in 4 years, The options are:
1. Cash in the annuity when it matures and give the money to her sons
2 Do a 1035 exchange for a new one.
I ran the numbers through TT, and we would owe $24 K in taxes if we cashed it in.
Fortunately, we do not need the money, and I am leaning toward option 2. DW is 77, and if she passes, the sons would get the stepped up basis.
Comments?
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
|
|
|
|
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!
|
01-27-2021, 07:54 AM
|
#2
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,263
|
Unless her sons really need the money now, I would think it would be better to roll it over to a new MYGA and have them inherit it as beneficiaries and avoid the tax hit because of the stepped-up basis.
I suspect that there might be a window of time after they inherit it that they can withdraw the money without any surrender charges.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
01-27-2021, 11:17 AM
|
#3
|
Recycles dryer sheets
Join Date: Jul 2013
Posts: 385
|
In general (understanding that no one has read the annuity contract), when the sons inherit it must they jointly decide how to deal with the annuity (i.e. cash out, continue etc.....) or can one son decide to cash out his half and the other decide to continue his half? I realize that this is a general question and that the terms of any individual annuity can differ. My 85 year old inlaws have a number of annuities and with 4 sisters this issue will certainly arise.
|
|
|
01-27-2021, 08:20 PM
|
#4
|
Thinks s/he gets paid by the post
Join Date: Jun 2002
Posts: 1,633
|
To those who have mentioned stepped-up basis, I have always been under the impression that such is not applicable to tax-deferred vehicles like annuities, IRAs, etc. Have I been missing something all these years?
__________________
friar1610
|
|
|
01-27-2021, 08:30 PM
|
#5
|
Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,068
|
Quote:
Originally Posted by friar1610
To those who have mentioned stepped-up basis, I have always been under the impression that such is not applicable to tax-deferred vehicles like annuities, IRAs, etc. Have I been missing something all these years?
|
You are correct. I just did some research, and there is no stepped up basis on the appreciation of the annuity. However, given the choice of me paying taxes, or the survivor paying taxes, I will let the survivor pay them. They are probably in a lower tax bracket than I am.
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
|
|
|
01-27-2021, 08:45 PM
|
#6
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,263
|
Yes, you are correct... I was going on what the OP had written and didn't think to verify it.
Another thing to remember about annuities is that they are income first and then principal.... so if you have $100k invested and it is worth $150k then the first $50k out is taxed and the following $100k is not taxed.... this is for a non-qualified annuity (taxable account).... if you have the annuity in a tax-deferred account then it is all income (assuming no basis/deductible IRA).
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
01-27-2021, 10:09 PM
|
#7
|
Recycles dryer sheets
Join Date: Jul 2018
Posts: 328
|
4 years away is a long time away. Who knows what new options they will have or what the interest rates will be I would think you could just renew the annuity if they offer you a good rate. I would also do a MYGA and that my require a 1035 exchange.
|
|
|
01-28-2021, 06:08 AM
|
#8
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Posts: 11,701
|
Oh yeah, annuities and basis. Generally, no step up. Survivors pay.
My Dad passed in '14. My siblings and I had options that spanned over 5 years regarding the annuity. I chose to continue deferral for 5 years, knowing I'd *probably* retire in 2018. And I did. So, '19 was a good year to absorb that income.
__________________
Retired Class of 2018
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|