ROTH annuity options

[scagnt83]

Inflation is an involuntary tax on people with low income. So even if tax rates for this income bracket never increase (which I believe would be true for current tax policy), that doesn't negate that there would be other ways to devalue that income stream. It's only been, what 6% this year?

So either she'll need less income or need to pull out more income for the same standard of living.

Just depends on what's important to her.

Who is worried about inflation in her situation? The OPs client has more than enough to increase her income if needed. And it would be expected that she would do so at some point. You are conflating 2 separate subjects here.

My comment was about the value of money now vs. 1980. The 24% tax on $30k in 1980 is the same as there being a 24% tax on $90k now in 2021. So the whole issue of higher taxes in the future should be a moot point. If you take inflation into account, tax rates for that income level are exactly the same as 1980.

And if she is not going to experience higher taxes in the future, a ROTH conversion makes very little sense.

 

[scagnt83]

Insurance companies... don't seem to notice too much though, even those with broker/dealers. I don't worry about them approving or not. They most likely will. It has to pass MY test of whether it'll work or not.

Well we both know that "penalties from source of funds" must be disclosed on the app. Taxes are included in that.

$120,000 is one hell of a penalty. No way that passes carrier suitability imo... a 24% loss... I think the most Athene will take is a 2.5% loss if I remember correctly. And thats even with a bonus to cover it (agility income bonus doesnt count to offset penalties).

 

[DHK]

The difference between our perspectives... is that I already see the money as lost as it is. It's an illusion to believe that all the money in the account (or rather the arrangement) belongs to her.

Now, what would be the BEST way to distribute and transfer these funds? Depends.

I do agree with you that bumping up to the 24% bracket would not be the best way to go. I'd rather stretch it out over 10 years and minimize the taxes.

However, if there is an advantage to doing more and doing it sooner, then it can be discussed, consequences, and rewards documented.

Keep in mind that, from what I read from the OP, he wanted to convert the entire $500,000 to a Roth... and I believe he meant in one tax year. Any form of stretching would be preferable to that.

 

[Allen Trent]

Watch the whole video sometime. It's 4 hours. He says he makes his largest sales in 800-1200 square foot homes where people are saving money out of their social security. He gets the client to tell the underwriters what the strategy is and, if insurable, to let them buy the policy to do what Van talks to them about.

Millionaire next door. That is factual for sure. Knowing he is from state farm, I would tend to think alot of those are single premium type cases & opportunities where a lazy asset is found to be moved to a more efficient wealth transfer tool. Then, for those that don't need all the qualified funds they have saved up, doing an IRA max plan systematically moving money annually from IRA to life. I have listened to him & always enjoy his presentations

 

[Allen Trent]

$120,000 is one hell of a penalty

And that is only the federal 24% part of it. Then you have to add state tax, if any plus the fact she will owe 24% on 18k of SS checks & lastly she will possibly pay another $200-400 more per month for Medicare Part B during the 5 year conversion period if she did $120k per year

 

[DHK]

Millionaire next door. That is factual for sure. Knowing he is from state farm, I would tend to think alot of those are single premium type cases & opportunities where a lazy asset is found to be moved to a more efficient wealth transfer tool. Then, for those that don't need all the qualified funds they have saved up, doing an IRA max plan systematically moving money annually from IRA to life. I have listened to him & always enjoy his presentations

He's not from State Farm. That was a speaking engagement he did for State Farm. He's with Mass, but originally New England Financial to Met Life then Mass bought Met.

 

[DHK]

And that is only the federal 24% part of it. Then you have to add state tax, if any plus the fact she will owe 24% on 18k of SS checks & lastly she will possibly pay another $200-400 more per month for Medicare Part B during the 5 year conversion period if she did $120k per year

Yes... but, assuming this could be in her best interests... after the transfer period is done, she'd NEVER have to pay those taxes again, depending on where the money is transferred to.

This is why, when commission disclosure becomes mandatory, I'll disclose the commissions - no problem. But I'll be comparing the plan against traditional advice: Estimated fees for 10 & 20 years, estimated taxes for 10 & 20 years - federal, state, Social Security, and Medicare/IRMAA... and do a full and proper comparison. (10 years because that's a period where you may incur more taxes in transferring assets; 20 years to show the after-effect.)

I'll earn every penny of commission within the proper context.

 

[Allen Trent]

He's not from State Farm. That was a speaking engagement he did for State Farm. He's with Mass, but originally New England Financial to Met Life then Mass bought Met.

Oh. That is where I got the state farm reference. At least it proves I retained something from it, but been awhile

 

[Allen Trent]

I'll earn every penny of commission within the proper context

110% agree. Hate that commission is treated like a dirty word. A 5% commission one time on an Annuity or mutual fund is made to be a crime, but 1% annually for 20 years is better for consumer.....lol

 

[scagnt83]

The difference between our perspectives... is that I already see the money as lost as it is. It's an illusion to believe that all the money in the account (or rather the arrangement) belongs to her.

You are framing it in a way to fit your personal preference of not having qualified funds. It is nothing but sales jargon meant to frame it in the way you want it framed.

Its not money lost because she is still earning interest on it.

Are the taxes you pay on a house "already lost" before you pay them?

Are the taxes you pay on a non-qualified account "already lost", before being paid?

The exact same thing could be said for anything in this country that is taxable.

Sorry David, but I feel that using jargon like that is not being sincere and factual about the situation. And it makes the whole annuity industry look bad when agents make statements like that.

I get your point. But it is being made in a disingenuous way imo to paint qualified accounts in a bad light, when the features you are painting as negative are no different than any other taxable asset.