The Primary Reasons People Buy Annuities

Safety of Principal!

Most people have worked hard all their life accumulating their “nest-egg”. They should not put their money in risky investments, especially our senior citizens. Most seniors are more concerned about the “return OF their money than the return ON their money”. Annuities are considered to be safe investments for the following reasons:

  • No market risk
  • Backed by the financial strength of large life insurance companies who are required to set aside a portion of their assets (reserves) to cover claims.
  • They also spread their risk through the industry’s reinsurance network, i.e. several companies share in a particular risk.
  • Tax Deferral – Taxes are paid only when money is received. IRC Section 72  This results in a much faster cash build-up. Your principal grows because you receive:
    • 1) interest on the principal;
    • 2) interest on the interest;
    • 3) interest on the money that normally would have been paid in taxes.

Competitive Interest Rates – At present, and historically, annuities outperform CD’s and money market accounts.

Accessibility– One of the biggest concerns, especially with seniors, is “Do I Have Access to My Money, Should I Need It?” There are a number of choices:

  • Withdraw interest as needed, monthly, quarterly, etc.
  • Exercise free withdrawal privilege
  • Total surrender
  • Annuitize (choose one of a number of income options)

Avoids Probate – By naming a beneficiary, your annuity account is paid directly to a named individual, making it accessible and eliminating probate costs.

Interest Rate Guarantees – Almost all annuity contracts have minimum rate guarantees…the rate can never go below a specified amount.

Current Income Reduction – CD’s, money market accounts, savings accounts, etc. require current taxation of interest earned even if it is not taken. Annuities are taxed only upon receipt of interest.

Lifetime Income Option – Annuities are the only investment vehicles available that guarantee you cannot outlive your monthly payments

Avoid Risk and invest in a tax deferred annuity! Your PRINCIPLE & INTEREST  is FULLY GUARANTEED at all times!!

You get:

  • Triple Compounding
  • Tax Savings
  • No Fees or Load Charges
  • Competitive Interest
  • Probate Avoidance
  • No Market Risk
  • Does not affect taxation of your social security
  • Liquidity (Ability to withdraw funds)  (Brsan)

Power of Tax Deferral -
from North American Brochure  
Tax Deferral

Annuities -

What Seniors Need to know HTML 

CA DOI Pamphlet

annuities.what.seniors.need.to.know

 

NAIC - National Association of Insurance Commissioners

Buyer's Guides

 

How much of your Pension & Annuity Income goes on line 4 of IRS 1040 and
thus counts towards MAGI Income for Covered CA subsidies?

Just the Count Taxable Portion of your Pension

Covered CA Countable Income

Reported on 1099-R   Form 1099-R     Instructions for Forms 1099-R and 5498 (HTML)

#Line11 Adjusted Gross income then add line 2a, 6a &   8 (Foreign Income)

to get Covered CA MAGI Income

MAGI Income from 1040

1040 Form   ***  Schedule 1  Additional Income & Adjustments to Income

Steve's Video on MAGI Income  *  Covered CA's Video

CA Insurance Code

Requirements for Replacement of Life Insurance  and Annuity Policies …………………….. 10509-10509.9

Standard Nonforfeiture Law for Individual  Deferred Annuities ……………………. 10168-10168.93

Misrepresentation of Policies ………………….. 780-784
Senior Insurance …………………………. 785-789.10
Unfair Practices …………………………. 790-790.15

General Provisions ……………………… 10110-10127.18

Pension and Annuity Income Glossary – Annuity AdvisorsCalifornia

Insurance Code – Standard Nonforfeiture Law for Individual

Deferred Annuities 10168-10168.92
Requirements for Replacement of Life Insurance – Annuity Policies 10509-10509.9
Article 6.  Misrepresentation of Policies ………………….. 780-784
Article 6.3.  Senior Insurance …………………………. 785-789.10
Article 6.5.  Unfair Practices …………………………. 790-790.15

One comment on “Annuities & MAGI Income Taxation Exemption

  1. 2 comments on “Annuity Income? IRA, Pension # 1040 Line 4”

    1. Anonymous says:

      I have just begun to receive retirement income that will make me ineligible to continue to receive Medi-cal benefits.

      I have questions about the Kaiser Program…

      Reply

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