Over 150.000 insurance professionals and consumers come to the Insurance Forum every month. Click here to register for FREE


Go Back   Insurance Forums > Insurance Agents and Brokers Forum > Annuities Forum

Reply to IRA into Annuity?     
Old 01-11-2015, 09:43 PM   #1
New Member
 
Join Date: Jan 2015
Posts:15
State: jasonten is an Insurance Agent from Tennessee
IRA into Annuity? IRA into Annuity?
My mother has an IRA she can start drawing out of in a few months but will be subject to income tax. Is there any possible way to transfer it to some kind of immediate annuity without being taxed?
------------------------------------
  Reply With Quote to IRA into Annuity?

Old 01-11-2015, 10:07 PM   #2
Guru
Newby on IRA into Annuity?
 
Join Date: Apr 2007
Posts:13,311
State: Newby is an Insurance Agent from Indiana
Newby is a member of 5000 posts Super VIP club
IRA into Annuity?
Originally Posted by jasonten View Post
My mother has an IRA she can start drawing out of in a few months but will be subject to income tax. Is there any possible way to transfer it to some kind of immediate annuity without being taxed?
She can transfer the money directly from her current IRA into a qualified annuity which is also an IRA. She won't pay taxes when she does that. But when she pulls money out of any IRA she will have to pay taxes unless the IRA is a Roth.

------------------------------------
www.fexcontracting.com
fexcontracting is about helping independent FE agents get good contracts with the top quality companies and get them up to speed fast with product knowledge and a plan to succeed.
  Reply With Quote to IRA into Annuity?
Old 01-12-2015, 04:52 PM   #3
Super Genius
 
Join Date: Jan 2014
Posts:232
State: jmhalvo is an Insurance Agent from Minnesota
IRA into Annuity?
Originally Posted by jasonten View Post
My mother has an IRA she can start drawing out of in a few months but will be subject to income tax. Is there any possible way to transfer it to some kind of immediate annuity without being taxed?
She got a big tax benefit what you put the money in, so there is no way to escape the taxes on the way out.
------------------------------------
  Reply With Quote to IRA into Annuity?
Old 01-12-2015, 05:05 PM   #4
DHK
Guru
DHK on IRA into Annuity?
 
Join Date: Nov 2007
Posts:5,931
State: DHK is an Insurance Agent from California
DHK is a member of 5000 posts Super VIP club
IRA into Annuity? Re: IRA into Annuity?
The only way to "escape" the taxes... is to have the tax liability offset by something else that is deductible.

Depending on her current situation, it may be a good idea to look into refinancing her home so that she can deduct more of her payment as an interest-deductible payment.
------------------------------------
  Reply With Quote to IRA into Annuity?
Old 02-24-2015, 12:23 PM   #5
New Member
 
Join Date: Dec 2013
Posts:7
State: fangard is an Insurance Agent from Texas
IRA into Annuity? Re: IRA into Annuity?
Originally Posted by DHK View Post
The only way to "escape" the taxes... is to have the tax liability offset by something else that is deductible.

Depending on her current situation, it may be a good idea to look into refinancing her home so that she can deduct more of her payment as an interest-deductible payment.
Refinance her house, create debt, add interest expense, just for the deduction.

Not sound advice at all, IMO.
------------------------------------
  Reply With Quote to IRA into Annuity?
Old 02-24-2015, 12:35 PM   #6
DHK
Guru
DHK on IRA into Annuity?
 
Join Date: Nov 2007
Posts:5,931
State: DHK is an Insurance Agent from California
DHK is a member of 5000 posts Super VIP club
IRA into Annuity? Re: IRA into Annuity?
The only way you can evaluate "sound advice" is only AFTER taking a full fact-find with a client, then to explore various options to help the client get what they want.

The client, in this example, is concerned about taxes. So, you determine what is available to help the client ease that pain. While refinancing may be an option, the client still needs to see if it fits the overall situation.

It may fit... or it may not. But to judge advice in a vacuum, separate from a fact-find, is irresponsible.
------------------------------------
  Reply With Quote to IRA into Annuity?
Old 02-24-2015, 08:45 PM   #7
Guru
 
Join Date: Feb 2012
Posts:295
State: Golfnut2112 is an Insurance Agent from West Virginia
IRA into Annuity? Re: IRA into Annuity?
Considering the standard deduction is $6,200 that would be one he$$ of amount to refinance to get any benefit. I agree with fangard it makes no sense at all.
------------------------------------
  Reply With Quote to IRA into Annuity?
Old 02-24-2015, 09:31 PM   #8
DHK
Guru
DHK on IRA into Annuity?
 
Join Date: Nov 2007
Posts:5,931
State: DHK is an Insurance Agent from California
DHK is a member of 5000 posts Super VIP club
IRA into Annuity? Re: IRA into Annuity?
Wow. Without doing ANY kind of fact-finding... everyone is easily able to determine the BEST available advice for someone! It's incredible! You guys must be psychic!

You are all assuming that she's poor. I wouldn't make that assumption. If someone is poor... why would they be worried about taxes?

Do we know if this person has other kinds of taxable income that can really make this a good recommendation or not? No... we don't know!

Are there real estate rental income along with business interests that are driving up her income to a higher amount? Again... we don't know.

Ever notice that all my posts included the word *may* as in *may be appropriate*?

Never cast judgment on advice until you take a fact-finder. These threads do not contain enough information to make any kinds of recommendations.

I will agree that it's something to be discussed, but probably ultimately rejected... once one has the conversation with the client to show that it's an idea... but an idea that may or may not fit.
------------------------------------
  Reply With Quote to IRA into Annuity?
Old 02-24-2015, 10:14 PM   #9
Guru
 
Join Date: Apr 2009
Posts:1,192
State: Stephen is an Insurance Agent from Arkansas
Stephen is a member of 1000 posts VIP club
IRA into Annuity? Re: IRA into Annuity?
Originally Posted by DHK View Post
Wow. Without doing ANY kind of fact-finding... everyone is easily able to determine the BEST available advice for someone! It's incredible! You guys must be psychic!

You are all assuming that she's poor. I wouldn't make that assumption. If someone is poor... why would they be worried about taxes?

Do we know if this person has other kinds of taxable income that can really make this a good recommendation or not? No... we don't know!

Are there real estate rental income along with business interests that are driving up her income to a higher amount? Again... we don't know.

Ever notice that all my posts included the word *may* as in *may be appropriate*?

Never cast judgment on advice until you take a fact-finder. These threads do not contain enough information to make any kinds of recommendations.

I will agree that it's something to be discussed, but probably ultimately rejected... once one has the conversation with the client to show that it's an idea... but an idea that may or may not fit.
DHK, the advice that you have provided here gives you benefit of the doubt with me, but I am racking my brain here trying to come up with any situation that could be uncovered with a good fact finder that doing a refi would be done to offset taxable IRA distributions.

I am always one willing to admit that I don't know what I don't know If you can educate us.
------------------------------------
  Reply With Quote to IRA into Annuity?
Old 02-24-2015, 10:47 PM   #10
DHK
Guru
DHK on IRA into Annuity?
 
Join Date: Nov 2007
Posts:5,931
State: DHK is an Insurance Agent from California
DHK is a member of 5000 posts Super VIP club
IRA into Annuity? Re: IRA into Annuity?
To put together a possible case, it takes a lot of assumptions. To simplify this for this post, let's just compare two things: IRA distribution and a new mortgage.

Let's assume the IRA is sizeable and the RMD is $25,000 per year - all taxable on top of social security income as well as any pension income. (Remember that if they DON'T take out the RMD, that the penalty is 50% of what they SHOULD have taken out.)

I'm ignoring the very real possibility of this distribution causing the person's social security to become included in the senior's taxable income. I'm also ignoring state income taxes too.

Let's assume a 20% tax on the distribution: $25,000 x 20% = $5,000 tax liability.

Let's assume that if there is a current mortgage has a payment of $2,083 ($25,000/year)... but the mortgage is in the later years... so the majority of this payment is principal payments with no tax benefits.

You refinance the mortgage so that the new payment matches the current payment and that it is primarily interest only during the first few years (as a standard mortgage would be). However, the current tax rate would apply to these payments - let's just assume 20% to keep the math easy.

Let's assume the same $25,000 interest payments (same payments as before) x 20% tax rate = $5,000 deduction.

$5,000 liability meets a $5,000 deduction and now it's a "wash". In effect, we've "cancelled out" the affect of the taxes on the IRA distribution for the current year.

How the mortgage can be structured could be a 10-year mortgage? Whatever it takes to keep the payment the same and maximize the tax advantages up front.


This is an overly simple method to compare, and it may not fit everyone's objectives. Those in their later years may feel quite uneasy about taking out a new mortgage, and they may even have trouble qualifying for it. I wouldn't do any kind of "Option-ARM" mortgage, nor would I necessarily recommend a cash-out refinance. It's just an idea or a concept that might fit... or it might not.

There are lots of assumptions in this in order to make it "work"... but sometimes it could be worthwhile to explore it... to make an informed decision.

Of course, it would also take studying an amortization schedule on the new mortgage to determine how well the strategy will work long-term... against the RMDs of the IRA.

----------

BTW, in my example, we didn't "create new debt"... we only restructured it to give new advantages today.

Of course, that assumes that they are okay with extending the term of paying on a mortgage. Lots to consider. Because if they've only got 5 years or less... they might as well pay the taxes and enjoy the paid off home in 5 years.

But if they have a longer-term mortgage... it can make all the sense in the world.

It all "depends" on the facts in the case.
------------------------------------
  Reply With Quote to IRA into Annuity?
Reply to IRA into Annuity? 

  Insurance Agent Forum > Insurance Forums > Insurance Agents and Brokers Forum > Annuities Forum


Tags
annuity




Similar Threads with IRA into Annuity?
Thread Thread Starter Forum Replies Last Post
How an Equity Indexed Annuity Works? insuranceexec Annuities Forum 91 02-23-2015 06:37 PM
Annuities Objection jmhopkins40 Annuities Forum 33 02-25-2012 11:38 PM
48 Hour Google Domination, Get a Domain to #1 in a Couple Days? blancapeak Insurance Websites 17 02-08-2012 10:31 PM
IRA to Roth IRA Using Annuity in 2010??? adell50 Annuities Forum 4 09-12-2009 11:26 AM
A Perfect "Trade In" From An Old Annuity CDA of America Annuities Forum 15 07-22-2009 11:43 AM



All times are GMT -5. The time now is 01:25 PM.

Forum enabled with vBulletin®
Copyright ©2000 - 2017, vBulletin Solutions, Inc.


Join the Forum - It's FREE

Share This Page



Weekly Poll

Where do we go from here? POLL
Nothing - No ACA fixes - status quo
29.82 %
HHS Rulings and band aid bills
17.54 %
Hail Mary repeal and/or replace bill
17.54 %
A bipartisan bill to fix ACA
35.09 %

Voters: 57. This poll is closed