Whats My Option

eza4short · 05-13-2009, 04:53 PM

Hey all, I am new to annuities so any and all information is great in regards to my question . My question is If a person is getting a settlement for a very large amount could he put this money into a immediate annuity with out having to worry about paying taxes or will he have to pay them any way? Also what is the norm with commission structure with annuities companies

moonlightandmargaritas · 05-13-2009, 05:16 PM

A portion of an immedate annuity is non-taxable as a "return of principal". The rest is taxable income.

The carrier will calculate it according to a persons age, length of payout, etc.

Ichiban · 05-13-2009, 06:46 PM

The payout will have what is called an exclusion ratio. This will show how much of each payment is taxable. In General interest is usually taxable and premium is usually not. I would get several quotes and as SPIA (Immediate annuities) rates will vary by company.

Typically Spia commissions are much lower than that of a deferred annuity. They are in the general range of 2-3% in most cases some a little higher some a little lower.

annuityseller · 05-13-2009, 07:03 PM

Why not try a split annuity and not loss control of the money and have 2 commissions with another one 5 or 10 years down the road or a FIA with an income rider are much better options MOST of the times??

arnguy · 05-13-2009, 07:13 PM

Originally Posted by eza4short

Hey all, I am new to annuities so any and all information is great in regards to my question . My question is If a person is getting a settlement for a very large amount could he put this money into a immediate annuity with out having to worry about paying taxes or will he have to pay them any way? Also what is the norm with commission structure with annuities companies

I don't think the previous posters answered your query directly. The answers were certainly correct with regard to the taxation of the proceeds of an immediate annuity, but that does not impact the taxable event of a settlement. You did not specify what type of settlement. Normally the proceeds from a settlement would be subject to ordinary income taxation. One can't duck it by placing the money in an immediate annuity. However, if the person is cashing in a life insurance policy, for example, by doing a Sec. 1035 exchange of the proceeds (including the gain) to an immediate annuity without actually touching the money (insurance company to insurance company transfer) then there would be no taxable event. Athough as stated above,thereafter the monthly payout from the immediate annuity would be subject to the "exclusion ratio" so that only a portion of those proceeds would be taxable at the ordinary income rate.

eza4short · 05-13-2009, 07:45 PM

It is a Lawsuit settlement. So I was just trying to learn what would be the best option for him. Thanks for the answers. Now if he put it in a Immediate Ann for lets say 10yrs if I understand it right he would not have to pay taxes on the principal since the he already paid taxes on that but then he will have to pay tax on any interest payment. Correct?

insuranceexec · 05-13-2009, 10:10 PM

Originally Posted by eza4short

It is a Lawsuit settlement. So I was just trying to learn what would be the best option for him. Thanks for the answers. Now if he put it in a Immediate Ann for lets say 10yrs if I understand it right he would not have to pay taxes on the principal since the he already paid taxes on that but then he will have to pay tax on any interest payment. Correct?

The "interest" is called the IRR (Internal Rate of Return) when speaking of a SPIA.

I say this so that when you call the companies; instead of wasting all that time requesting a quote you can simply ask them what their IRR is currently on their SPIA's.

There are many options that an individual can do; one that no one has mentioned yet is that of an income ladder. If you would like you may give me a call and I can walk you through one. I can also quote the top 50 SPIA companies for you; so you know the best one to go with. I hope this helps...........

P.S. Arnguy your knowledge of annuities is either getting much, much better; or you were being facetious in the last annuity thread...LOL........Either way keep up the good advice!