How Are Monthly Life Annuity Benefit Payments Treated?

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How are monthly life annuity benefit payments treated, Stan The Annuity Man? Hi there, I'm Stan The Annuity Man. America's annuity agent, licensed in all 50 states and Puerto Rico. Big question here. We're going to cover it from a myriad of angles after this. >> [music]

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>> All right, when you're getting a

0:24How Lifetime Income Payments Are Taxed

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lifetime income payment from an annuity, there's four types of annuities. Single premium immediate annuities, deferred income annuities, qualified longevity annuity contracts, and income riders. Those are all contractual guarantees to pay for as long as you're breathing. And

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if joint, as long as one of you is breathing, okay? But coming out of IRAs, traditional IRAs, non-IRAs, the income is treated at ordinary income levels from a taxation standpoint. Now, at the time of this taping, Roth IRAs are still tax-free. I say that because I don't trust the

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government, and I hope that you're going to be grandfathered in when they eventually do change the rules, in my opinion. That income will be tax-free out of a Roth. Now, let's dig in a little deeper.

1:11How Lifetime Income From Traditional IRAs Are Taxed

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Traditional IRAs, when people say, "No Buddha annuities out of IRAs, Stan." They're stupid, okay? Just walk away from them, they shouldn't be your friend, unless they're family. Then you have to see them at the family reunion. If they make a good macaroni,

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who cares, right? You just know that they're wrong. But coming out of of um an IRA, any type of lifetime income, whether it's a uh immediate annuity, a deferred income annuity, a QLAC, qualified, that's for IRAs, or income riders, that's coming at ordinary income levels, just like

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everything else you take out. Now, um I would encourage you to email me [email protected] or book a call so that we can talk about how RMDs work with these annuities. Then the topic of the video, but you can get me for that. And I've also written

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owner's manuals on all of these annuity types. You can go to my site at theannuityman.com and you can download them for free, but I would encourage you to engage with me, my team. Everybody in my office is licensed, but they're not on commission, all right? So, but one of

2:15How Taxes Are Calculated For Non-IRA Assets

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the things I want to focus on right now we've talked about is yes coming out at ordinary income levels. You know, Roth would be tax-free. But if you're using non-IRA assets, all right? And let's take an immediate annuity for example. That's a combination return of principal

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plus interest, the lifetime income you're getting. So, in a non-IRA setting, checking account money, okay? You're not going to pay taxes on the principal. You'll pay taxes on the interest, so it's tax-favorable. And that continues until you draw the

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account down to zero. Once you draw the account down to zero and you're living forever and you're knocking the cover off the ball, then everything's taxable at that time. But who cares? You're you're in the annuity company's pockets. Same thing applies for deferred income

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annuities because a deferred income annuity is nothing more than an immediate annuity that you defer. Income

3:06How Taxes Are Calculated For Income Rider

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rider's a little bit different than a non-IRA checking account type money situation because you have income rider Income rider is an attachment to a policy. Typically, we hold our nose and we attach it to an index annuity. We don't care about that.

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We only care about the lifetime income stream. All right? So, that income is coming out, all right? And there's three phases of taxation. First of all, it's last in, first out. You're going to pay taxes on the gains. Once you get to the principal that and

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you've drawn down the income rider, once you get down to the principal amount, that part's non-taxable. We're talking about non-qualified non-checking account type money. And then once you draw it down to zero, then it's going to be taxable. We can explain all that to you.

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We sold billions. We're the biggest one out here. Top agent in the country. Been doing this for decades. But yes, it's going to be taxable ordinary income levels. I mean,

4:02How Annuity Companies & The IRS Work Together

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annuity companies and the IRS work in conjunction together. They really do. Um In fact, you know, QLACs, qualified longevity annuity contracts, were put on the planet and developed by the IRS and the Department of the Treasury. So, if someone says you never put a

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never put an annuity inside of an IRA. Well, um QLAC? Qualified longevity annuity contract. And the reason that that was put on the planet is that Social Security, the best inflation annuity that you already have, was never put in place to be your sole source of lifetime income.

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So, Department of the Treasury and IRS said, "Okay, let's develop QLACs so that we can encourage people to use their IRA money for lifetime income." I think that's good. At the end of

4:57What Retirement Is All About

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chapter one, you go into chapter two, which is about you, which is what I call retirement. It's all about your income floor, player. It's all about what's coming in. Social Security, dividend stocks, rental income, your cotton candy vendor at the fair that you do every summer.

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Do they still sell cotton candy? I mean, as a diabetic, struggling. Um cotton candy, man. That'd probably just blow the top of my head off. But the point is, income income floor is what what's coming in. Annuities, those four types, can add to that income

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floor, can fill that gap. So, once again, IRA, ordinary is coming out ordinary income. Roth IRA, tax-free. Checking account money, depends on what type. There's different ways that you're getting tax favorable treatment, but we'll explain all of that to you.

5:54Next Steps and Helpful Resources

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So, go to my site. Schedule call. If you don't get me, demand me if you want me. If you go, "I wouldn't talk to that crazy son of a gun for nothing." That's okay. You know, we have licensed people that aren't on commission that that they speak just like me, but

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less Southern twang. You know what I'm saying? You know what I'm saying? You know what I'm saying? See, I like Southerners. Like, if you're in the deep South, I mean, they're talking in the back of your throat. "How do you say that? How do you say that?

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How do you say that? How do you say that? Hey, what do you want to say?" And you're like, But, that's how like my Uncle Max used to talk. "Hey, WHAT DO YOU WANT TO SAY?" "WHAT DO YOU WANT TO SAY? What do you want to say?" You're like, "What?" "Hey." You know, it's one of those

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things, but I love the South. Love barbecue. Love Cheerwine. Love scrapple. You might know what scrapple is. Do me a favor. I know I know I'm all over the place. It's a long story why. Do me a favor. Up above me is a good video on inflation. I did one talking about how annuities

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contractually, factually, pragmatically take care of inflation. And it coincides with what we're talking about today, which is how lifetime income is taxed and how it how the IRS looks at etc. Watch that video. It's the facts. All this nonsense index RILA hypothetical

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theoretical unicorns driving the butterflies. Hypo- This the illustrations It's why I have gray hair. You know, I'm convinced I would look way more vibrant if those sales pitches didn't exist cuz I hear them all the time. "Well, this old boy down the road said this." Oh, stop.

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Do not buy annuities for growth. Do not buy the dream cuz you're going to own contractual realities. I need a sip of water. You know, I do. I'm 62, man. You know? But, I appreciate you joining us. I do these every single day, new content because crazy like that and I want to edutain.

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My name is Stan The Annuity Man. See you next time.