Retirement Annuity Contract Tax Relief

0:00
Retirement annuity contract for tax relief. It's a little mouthful, you know?

0:06
My consultants, my people around me, chose this topic. They're like,

0:09
"Stan, you need to do this topic." I'm like, "That's a weird word salad bunch of stuff."

0:14
Hi there, Stan The Annuity Man, America's annuity agent, licensed in all 50 states and Puerto Rico.

0:21
Looking forward to talking about this just because people have the IRS living

0:26
in their head rent-free these days. I guess all the time. I guess that's what

0:31
the IRS does. But we're going to talk about that. We're going to talk about some of the

0:37
ways that some annuities can help and give you some tax relief after this.

0:49
So, I guess the first thing to do is just define tax relief.

0:53
I mean, there's nothing tax-free unless you put the annuity inside of a Roth IRA.

1:00
So, annuities can be used in traditional IRAs, Roth IRAs, and Non-IRAs, so non-qualified checking

1:07
account-type money. But if you want tax relief, you put an immediate annuity inside of a Roth IRA,

1:14
and that lifetime income stream is going to be tax-free unless our

1:19
politicians change the rules. Hopefully, they grandfather you in and that never happens.

1:23
Now, one of the big things that's happening right now in the annuity industry,

1:27
which is just horrific, borderline fraudulent, is that a lot of agents are having people do

1:35
Roth conversions and using indexed annuities and bonuses and all that

1:39
stuff to do it. Garbage. Absolute garbage. Mathematically, they cannot show it working

1:45
in a contractual way. They can only show it in an illustration that has non-guarantees,

1:52
like hypotheticals and theoreticals, and those never come true. So, be careful out there.

1:56
A guy called in the other day, and he's being pitched this double-index annuity flipperoo jibity

2:06
upfront bonus. And I went, "You do know that you don't need annuities to do a Roth conversion,

2:12
don't you? You could do it with any type of investments." "Well, no, I didn't know that.

2:16
The way he explained it, you had to do it with annuities." Okay. Be careful out there.

2:23
Tax relief, when it comes to retirement contracts, you can look at it a couple ways,

2:28
like multi-year guarantee annuities, which is the annuity industry version of a CD.

2:32
So, you can lock in a specific interest rate for a specific period of time. Please don't make it

2:37
any more difficult than that. You go to the bank, you buy a CD for a specific rate for a specific

2:43
period of time. MYGAs are issued by life insurance companies at a rate for a specific period of time.

2:49
The difference, however, in a Non-IRA account, like non-qualified checking account-type

2:55
money, is that interest grows tax-deferred. So, with CDs, if you bought CDs in the same

3:01
type of account, you have to pay taxes on the interest. With MYGAs, you can defer that.

3:05
Now, when you finally take it out, whoever takes it out is going to have to pay taxes on that interest

3:12
earned, but you can kick the tax can down the road, as they say in the South, or in the North,

3:18
push the tax puck down the ice, as they say in Minnesota or Wisconsin. You can do that.

3:28
Okay? I guess that's tax relief for a lot of people that just

3:32
want to protect the principal. MYGAs, multi-year guarantee annuity contracts,

3:36
again, the annuity industry version of a CD, make more sense than CDs because of

3:41
that tax-deferred nature. They don't want to create more taxable events. Okay?

3:48
Also, in a Non-IRA, non-qualified checking account-type money,

3:55
you can use an immediate annuity or deferred income annuity and have

4:00
just a portion of that income stream be taxable because lifetime income from those

4:04
two products is a combination of return of principal plus interest. And if it's Non-IRA,

4:08
then you're only paying taxes on the interest. That's some tax relief.

4:14
Qualified longevity annuity contracts can be used in an IRA. So, if anyone says never use an annuity

4:20
inside of an IRA, you might want to just nudge them and say, "You're sounding stupid again,"

4:25
because the IRS and the Treasury put this product on the planet in 2014 for use inside

4:31
of a traditional IRA to lessen the taxes on your RMDs. The amount of money in a QLAC is not used to

4:38
determine and calculate your RMDs within your IRA. So, you can get some tax relief there.

4:47
But be careful. You're going to hear a lot of things out there from a tax relief standpoint.

4:54
One of the ones that bothers me is life insurance, taking a loan from

4:58
life insurance and that being tax-free income. No, that's not tax-free income. That's a loan.

5:04
I had a guy argue with me the other day. He goes,

5:06
"No, it's tax-free." I went, "No. When you go to the bank and you take out a loan,

5:13
is that income tax-free or is that a loan?" He goes, "That's a loan." I said, "Okay. When

5:18
you go to the life insurance product that you were just sold and you take money out of it,

5:23
is that income or is that a loan?" He goes, "That's income." I said, "No, it's a loan."

5:27
I mean, this guy was myopically convinced that's tax-free. He told me it's tax-free. Okay.

5:34
It's a loan. The IRS, our friends, there's not a lot of loopholes left. The Roth IRA is a loophole,

5:45
but you have to pay so much upfront in taxes that you have to mathematically

5:51
run the calculation to see if it makes sense and how long it's going to take to break even.

5:57
I am amazed at people that go, "Well, Roth is tax-free. Yeah, I paid a lot of upfront taxes

6:03
on that, but it's tax-free now." Did you run the numbers? "Well, no." Okay.

6:08
I'm not against them. I don't trust the government for changing the rules. They've changed rules on

6:13
everything. Why won't they change rules on Roths? Hopefully, they won't because over

6:18
20% of the households have Roth IRAs in some form or fashion. Most of them are very, very

6:24
small because some 401(k)s allow Roth conversions internally, and a lot of people have done that,

6:31
but they're very small. There's not a lot of money there. So, from a voting block standpoint,

6:37
I think politicians could smack Roth people around a little bit.

6:41
Tax relief could come from, in my former days when I was with Morgan Stanley and UBS,

6:46
tax-free municipal bonds, but they're hard to find. There's just not a lot of

6:51
room legally for you to get a lot of tax relief.

6:56
Annuities have, say, three or four occasions where you can get some tax relief using specific

7:04
strategies and obviously talking to us about that. But this is a question I got the other day,

7:11
and this might be on your mind too. Life insurance companies issue annuities.

7:16
Life insurance, when you die, that death benefit passes tax-free, probate-free, to your beneficiaries.

7:24
I always say life insurance is the best return on investment you'll never see because you're dead.

7:29
So, life insurance companies issue annuities, but the death benefits on annuities are not tax-free.

7:36
Life insurance is tax-free. Those death benefits on annuities issued by life

7:41
insurance companies are not tax-free. So, there's not a lot of tax relief there.

7:49
My advice to you is, if you're looking at retirement already in chapter 2,

7:53
which is about you. It's all about your income floor. It's all about the income that's hitting

7:57
your bank account regardless of what happens in D.C., L.A., Iran, Great Britain, or France.

8:05
It doesn't matter. What's hitting your bank account so you can go live your life?

8:09
You already own the best inflation annuity on the planet. That's Social Security.

8:12
Do you need more guaranteed income like that? If you have a pension,

8:15
do you need more guaranteed pension income like that? What's coming into that account

8:20
every single month? What's the continuation of that income floor when you pass away and your

8:26
spouse and/or family gets it? What's that continuation? Do you know that? You should.

8:34
Yes, the taxes are important. Yes, you can figure all that out. But figure out the basics first.

8:39
And the basic is that foundational income floor that you need in chapter 2, knowing that there's

8:45
three levels of retirement: go-go, slow-go, and no-go. And you've got to spend the money and take

8:51
advantage and travel and do your thing while you still can because there will come a point in time,

8:56
if we live long enough, where we're drooling in a drill cup and crapping into a diaper. It's true.

9:04
So, do me a favor. Go to my site, theannuityman.com. You can run quotes.

9:09
You can download my owner's manuals. You can see videos. You can do all kinds of

9:12
things. Best consumer site on the planet. Okay? Everything's free: free consultation, everything.

9:17
But do me one last favor. Above my head is a ticking clock. Nothing's going to explode.

9:22
It is a video I did on lifetime income, and it's a video that I did on lifetime income

9:28
looking at it from the standpoint of what's going to happen with artificial

9:30
intelligence and how that's going to change the game for lifetime income

9:34
pretty soon in the annuity industry. It's important that you view that. Alright?

9:39
My name is Stan The Annuity Man. See you next time.