Re: Taxes in Retirement

[BreadWithSpam@fractious.net]

annuity <McLeodAnnuity@gmail.com> writes:

> This can help some.
> Put your RMD withdrals into a deferred annuity. The build up

Or into any tax-efficient investment vehicle.  If you're
taking RMDs, paying huge annual annuity fees to buy some
tax deferral at that stage is a very expensive thing to do.

> of triple compounding is not reported on your tax return.
> You will not receive a 1099. Possibly reducing your SS taxes.

"Triple" compounding is marketing-speak for normal, old
fashioned tax-deferred compounding.

It is true, however, that there are some things that can
be done inside an annuity that are hard to do out of one.
For example, municipal bond interest - generally free of
federal income taxes - can have a negative impact on the
taxation of your social security benefits and so they may
not be as good as a tax-deferred account.  

If you're taking RMDs, though, the only way putting them
into a tax-efficient vehicle makes sense is if you are
getting enough income *outside* the RMDs to live off of.
If the RMDs are *entirely* excess income, chances are
pretty good that your income is high enough that muni
bonds may still makes sense - your income is probably
high enough that all (well, 85%) of your SS income is
going to be taxed anyway.

If you have any earned income, I'd certainly like to
see you max out a Roth before considering anything like
an annuity.

Lastly, if you are considering deferred variable annuities
specifically as a place to put your RMDs so that that money
may continue to grow tax-efficiently, consider only no-load,
no-surrender period ones with very low-expense investment
options.  The vast majority of VAs have absurdly high fees
and long surrender charge periods and very expensive and
mediocre investment options inside of them.  Watch out for
fees.

> If you have non-qualified dollars that have to be reported on your
> tax return, then move those over to a fixed annuity. This will
> reduce your reportable income.

(a) moving the dollars - after reporting and paying taxes on them -
    into an annuity of any kind does not lower your current taxes
    at all.  
(b) a fixed annuity paid for with non-qualified dollars generates
    both taxable income and non-taxable "return of capital".
    Not paying taxes on the portion of it which is return of
    capital is not a huge tax advantage.  Buy a fixed annuity
    if you need guaranteed payments for life, not because of
    supposed tax advantages.

Folks, be wary.  There are some situations where annuities
(of all the various sorts) may make sense.  But they are
not all that common.


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