Departments of the Treasury and Labor Encouraging Americans To Use Annuities

[retread]

OK, here you go.

Example: You are a CD investor. You do not want market risk of any type. Security Benefit's Total Interest Annuity gives a 4% first year rate, with a 1% GMIR. SBL also has a 3% GMIR in the fixed account on it's Variflex Variable Annuity.

So your advisor recommends you make a Roth IRA contribution, and purchase one of these 2 products in the Roth IRA. The annuity because the interest rate(s) are superior to CDs. The Roth IRA makes that interest tax-free for life.

Annuity in an IRA. Client wins BIG TIME.

Good example! I didn't think of this prior, but doesn't that mean that there will be no RMD on those annuities at 70 1/2 due to being in a Roth?

 

[Norwayguy]

Good example! I didn't think of this prior, but doesn't that mean that there will be no RMD on those annuities at 70 1/2 due to being in a Roth?

No RMDs as a cd or roth IRA.

 

[Mattschmidt]

There are plenty of reasons to put an annuity inside a 401k or IRA besides the tax deferral.

Agreed...It often times makes perfect sense to do this...Mutual fund companies and stocks and bonds won't give you any guarantees to returns, and for someone who doesn't want the risk may prefer a certain type of annuity inside of their tax deferred vehicle

 

[dlvhi]

??? I assume you mean annuities versus IRA or 401(k), unless you are the type that wears a raincoat indoors when it rains.

All 3 are tax deferral vehicles.... you don't put one inside the other.

Hello retread, didn't see your comment on my post before now, but it looks like you have gotten some pretty good answers. I have been doing taxes for 30 years and never could figure out why the common wisdom was "don't use annuities in an IRA".

As has already been said, you can get a better guaranteed return than with other products. The fact that the annuity itself is tax deferred really doesn't matter because there is no cost (or reduction of income) for putting it in the IRA.

For myself, if I want fixed income, I will put it into an IRA to get the deduction going in - don't need the income deferral but that basically is a no cost feature.

I hope the government action mentioned in the original post will encourage more people to use the income for life feature of the immediate annuity.

 

[retread]

Hello retread, didn't see your comment on my post before now, but it looks like you have gotten some pretty good answers. I have been doing taxes for 30 years and never could figure out why the common wisdom was "don't use annuities in an IRA".

As has already been said, you can get a better guaranteed return than with other products. The fact that the annuity itself is tax deferred really doesn't matter because there is no cost (or reduction of income) for putting it in the IRA.

For myself, if I want fixed income, I will put it into an IRA to get the deduction going in - don't need the income deferral but that basically is a no cost feature.

I hope the government action mentioned in the original post will encourage more people to use the income for life feature of the immediate annuity.

It has been my experience (on more than one occasion) that I often learn more from stating my sometimes inaccurate observations (IOW: inserting shoe into mouth) even if I suffer some deserved ridicule. It either takes a lot of bravery to speak one's mind, or just be an ignoramus.... you be the judge. In this case, I was corrected from information given to me in the past by those who were supposed to be financial experts. I thank you all and apologize for my ignorance, but better late than never! (At least I am willing to change my opinions when confronted with a good argument.)