How do you avoid taxes on a $70K death benefit payout from an IRA annuity?
453258
try to deffer the payments as much as possible so that if this ends up being you only source of income then you will end up paying less taxes i don't think that it will be tax free. unless it is a roth IRA where you paid taxes upfront to later have tax free money when you get the money.
1110697
Who is handling the transfer of all the other property if there were any such as the home, furnishing, bank accounts and any other savings, stocks or bonds?\n\nIf there is no probate you should call the insurance company that has the annuity  and find out from them when you will be able to receive our funds.\n\nYou might also check and see if the amount you received has any tax consequences, with a trusted tax advisers that your family or you know.\n\nI hope this has been of some use to you, good luck.\n\n"FIGHT ON"
626212
Sorry I must be getting old too ! Did you say you were already dead and wanted to be frozen. Must be going deaf !\n\nI was studying your Avatar for signs one way or another.\n\nI agree with the other respondents your strategy does seem to be high risk.\n\nI might be easier to give some money and live for seven years. However, I can understand you want to enjoy all of it right up until the last minute.\n\nYou could consider a family trust fund.\n\nRe the reclaiming of tax ( was that a double re ) it is your Estate that would be taxed not you as you would be presumed dead. Either way, I think you only have five years to make a claim for repayment of tax.\n\nGood Luck with the liquid nitrogen.
896171
Let me make sure I understand the question.  Are you saying you are taking out an early distribution from your IRA of $40,000 and want to shelter all of it from the 10% early distribution penalty?  Well, first of all, you only have $10,000 per person per lifetime of 1st time home buyer's exemption.  Of course, if there are two of you, each can pull out $10,000 from their own IRAs.\n\nIt looks like you are reading Publication 590.  Good.  The phrase that is confusing to most people is "The part not subject to the tax is generally the amount that is not more than the qualified higher education expenses (defined later) for the year...".  What they are saying is that the amount you can exempt for education can not be more than the amount you paid for education.  They are not saying you can't include other exemption items on top of the education exemption items.\n\nSo, if you paid $11,000 for tuition, fees, books, supplies, and equipment regardless if it was from a loan, a gift, or from your own wallet, but not from a scholarship or grant, and if you paid at least $10,000 for a house, and if your medical expenses exceeded 7.5% of your AGI by $2,000 (regardless if you use a Schedule A), then you can pull out $23,000 from your IRA and not be penalized.  Don't forget that even though you avoid the penalty, you will still have to include the amount you pull out as taxable income in the year you pull it out.  There is nothing you can do to avoid that.
776810
Excellent question that is sure to get a wide variety of answers.\n\nPersonally, I'd take the loss and use the $3000 against other income.  This will lower your AGI and your taxable income...both are usually good things.  Lower your tax burden now.  Use the windfall to purchase more of the mutual fund.  If you are happy with the fund, why sell it?\n\nThe federal government taxes LTCG at 15%...CA taxes all gains the same.  If you don't sell the mutual fund, you save 28% + 9% x $3000 or $1110 in taxes for two years straight.  If you sell the mutual fund now, you will lose out on that windfall.  If you sell the mutual fund 5 years from now, the extra tax burdon will be 15% + 9% x $3000 = $720 ... a net gain of $390.  Not only that, but you will be able to make interest off the government's $720 for five years before having to pay it back AND you won't be out the 1% sales expense.\n\nIn general, it is best to offset short-term capital gains with losses, but try to not offset long-term capital gains.  A better way to say this may be to say never use long-term gains to offset any capital loss.  Take the loss, lower your income, and enjoy the tax break.\n\nOne big caveot is you never know what Congress will do with tax rates, especially capital gains.  A shift to a Democratic congress may cause the LTCG rate to go back to 20%.  Even at 20% this type of tax planning makes sense, but the benefit drops considerably.
483855
Expenses are generally higher in variable annuities than mutual funds but there are no front-end loads to deal with and annuities can offer things that mutual funds can't - like guarantees. \n\nAnnuities may help you 1)Receive guaranteed retirement income payments for as long as you live, 2)Protect beneficiaries with a death benefit 3)Diversify your investments. 4)Grow assets on a tax-deferred basis and 5)Avoid outliving your assets.\n\nIf you want to protect your beneficiaries, variable annuities generaly offer a choice of death benefits to protect assets for your beneficiaries should you die prior to annuitization. Also, a variable annuity’s death benefit avoids the expense and delays of probate.\n\nIf you're concerned about the volatility of the stock market some variable annuities offer an “Income Benefit” feature. This optional feature (available for an additional fee) can provide you with a minimum level of income (upon annuitizing the contract) should the market decline dramatically. Some variable annuities also offer principal protection features which guarantee that you will get back at least your initial investment after some stated period of time (typically ten years).
801100
The annuity provider should be able to help you withdraw early if that’s what you need to do. Most plans allow for limited early withdrawals without penalty. However, if you need to withdraw a lot of money or deplete the account, you will be facing stiff penalties if you decide to withdraw early. The IRS will levy a 10 percent tax on your earnings, and the penalty, or surrender charge, from the annuity provider will be pretty high, too.\n\nContact your annuity issuer and find out what you have to do to get your annuities early.\n\nHope this helps,\n\nBarnes@MostChoice\nhttp://www.mostchoice.com/annuity.cfm
908289
Doesn't sound like you sold them, so I don't beleive you'll have to pay ataxes.  The other good news is that once in your retirement account, you can sell them and pay no taxes.  Congrats.
139827
Wow, some really dangerous opinions in here!\n\nLife insurance proceeds are there to provide protection for your dependents in three basic areas:\n\n1) Funds made available to pay final costs (burial, medical bills, etc.) and debts (mortgage, credit cards. etc)\n\n2) Funds to make up the difference between the household income before your death and what it would be following your death.\n\n3) Funds to invest to meet the savings goals you would have been saving for had you not died. (Think children's education)\n\nNot everyone has needs in all three areas and like Lady Death alludes to in her answer, you can accumulate assets to offset these needs. This is referred to as Self-Insuring. In an ideal world, we would all quickly accumulate wealth sufficient to fully protect our families while not accumulating enough wealth to fall afoul of estate taxes. In reality this is not always the case, hence the continued need for life insurance.\n\nWhen you first apply for a policy, you go through an intense process called underwriting. This is when the insurance companies underwriters tak a very indepth look at you health (through blood and urine tests, questioning you, questioning your doctors and requesting information on you from the Medical Information Bureau [Think of the MIB as a Credit Bureau that tracks your health]) and your financial situation to determine IF you are insurable and how much your premiums are going to be.\n\nWhen people say you should only buy term insurance, be skeptical. It is a very unobjective thing to say when they know NOTHING of your situation. Term insurance is an easier sale and some salespeople follow the path of least resistance rather than providing the best objective advice to their clients. Buy Term and Invest the Difference- this assumes that you have the discipline to invest the difference rather than spend it, that you accumulate enough assets to self insure before the term period runs out, and that you don't accumulate too much with respect to estate taxes. Otherwose, you find yourself in the unenviable situation of having to go through underwriting again to put another term policy in force, with premiums based on your then current age, of course. This is particularly bad if your health has deteriorated in some way, jeapoardizing your ability to get coverage. Some may say you could convert the policy to permanent insurance at that point but that negates the tenents of the startegy and why put a permanent policy in place then, having given up all those years when you could have been funding it?!?\n\nMy best advice is to consult a financial planner (AVOID anyone who tells you what type of insurance to get without asking any questions of you and run away from anyone who uses a "multiple of salary" approach to determining your need) and have a survivorship analysis completed. Your planner will educate you on the different types of insurance and develop an insurance portfolio to meet your individual situation. It may be that term insurance is the right thing for you right now; maybe not. For anyone to say it is without the facts is not very intelligent nor prudent.\nGood Luck.
393236
It depends.  Do you have a Roth IRA?  You can use that money without a tax penalty.  A regular 401K through an employer will have some penalties usually.
666715
First, it is not always optimal for you to pay off your mortgage. It is one of the few non-recourse loans available to you, and that lets you keep the upside while giving the bank the downside (they get the house, but nothing else if things go bad). \n\nAlthough I do not recommend negative amortizing loans, I would recommend that you change your goal of "paying off your mortgage before retiring" to "maximize my after tax wealth." Depending on your real estate market, and the interest rate on your loan (after tax interest rate of course), etc, it may be optimal to take the equity out, invest it in a way such that you can still draw from it to pay the increased mortgage payments... (i.e. do not use the extracted equity to buy a new Porsche).\n\nAdditionally, make sure that BEFORE you do teh 403b (unless they match in which case do the minimum required to get the match asap!), take advantage of the ROTH IRA. It has many advantages over a traditional IRA (untaxed at retirement, no required distributions at retirement), and the only disadvantage I can think of is the fact that you don't get the tax deduction today (although even this one is not entirely true depending on your income level). However, if you assume that tax rates will be higher at retirement (we all want to retire rich, right?) then the ROTH dominates teh traditional. Also, income tax rates are at historically low levels today, I'm assuming that our trade deficits and national debt levels will require increased taxes in the future... the ROTH is indifferent and protects you from such a development :)\n\nForget Universal Life. Start with Term, if you have a reason for life insurance at all. The rule of thumb would say that disability insurance makes more sense for younger workers than life insurance... Another rule of thumb: trust very few insurance salesmen, and those that you do trust almost always tell you that you need more than actual.\n\nBest of luck, hopefully this bit on personal finance helps.\nAs they say, it's just my $0.02!
493145
This is a HORRIBLE idea. When you withdraw from your retirement fund prematurely the company that is holding it is REQUIRED to withhold 10% because that's the penalty, however, that isn't all you end up paying for that money.  You still have to pay taxes on the additional income from this withdrawal on top of the 10% penalty, which can total as much as 20-30%.  \n\nFor example, if you withdraw $10K from your retirement fund, you will receive a check for $9K, however during tax time your employer will issue a 1099-R for $10k and you will have to add this to your wages.  So if you make $35K per year, you will have to pay taxes on $45K rather than $35 K in addition to paying $1k in penalties.  \n\nDon't touch your retirement fund, instead, finance your car.  Paying 6% to finance a car is much better than taking money from your retirement fund and paying 20-30% to be able to use your retirement money.
563968
Do not use insurance as an investment.  If you invest in a universal life, or other cash building policy has limitations as to the amount of return VS death benefit.  This is a point where the IRS calls it a MEC, or Modified Endowment Contract.  You will get taxed heavily if this value is superceeded; they consider the policy an investment rather than insurance.  The only way to get around this is to increase death benefit (which raises your monthly/semi-annual/annual premium), decreasing your return.  And term life insurance only pays if you die.  If you are 29, look towards an IRA that provides various investment options and invest fairly aggressively.  If you have access to a company 401K, utilize that, as many employers match a certain percentage, and most of it is pre-tax contribution.  If you are OK with lower yields and like the availability of cash, look into a money market account from a large institution, such as vanguard or fidelity.
785959
The other answers forget..\n\nRule 72 (IRS) allows u to pull the $$$ from IRA (assume it applys to 401k too)...\n\nIt allows u to get it before 59.5 with only taxes to pay if u do it over a specified period of time.\n\nFor example u pull 40k out but do 4k per year for 10 years.\nThis is a way get $ out before 59.5 without penalty.\n\nIRS recongizes that there are life events that force many to grab funds from existing sources for emergencies.\n\nU could use this rule to pull out 100% of the 401k, and use portion for wife and portion for self.
630556
You definitely want to roll it over to a self-directed IRA, where you'll be able to invest in stocks, bonds, mutual funds, annuities, and yes, even CDs.  Stay away from the bank, their idea of a good return on an IRA is a 5% CD. No one under 55 should ever have CD's in their IRA, it's a waste of both your age (which can be a powerful weapon) and the IRA's tax-deferred status.  CDs are for much older people, or for money that needs to remain somewhat liquid--which is something IRA money does not.\n\nDespite Scuhbby's inane assertion that the average mutual fund does 16-30% (no, the average mutual fund loses money), mutual funds are absolutely the way to go.  Pick a broadly diversifed mix of assets classes, cover all your bases, and remember to rebalance every year.  A financial advisor might be able to help you with this, but if you have the tools, talent, and time to do it yourself, go for it.  And oh yeah, the discipline, which is the most important.\n\nMake sure you hit all the asset classes, such as large-, mid- and small-cap stocks, international stocks, investment grade and hi-yield debt, foreign debt, commodities, real estate, and precious metals.  Come up with a mix you're comfortable with, and sit back.  A properly allocated diversified portfolio will average 8-12% return per year, on average, and you'll be able to take advantage of the IRA's tax-deferred status.\n\nMOST IMPORTANT, if you qualify income-level wise, IMMEDIATELY look into converting your IRA (once you've rolled over the 401k) to a ROTH IRA.  Thus, not only will your preserve your tax-exempt status year-to-year, you'll also ensure all future earnings will be 100% TAX-FREE.  Even a normal IRA/401k requires you to pay taxes when you take distributions.  Converting could have some current year tax consequences, so consult a financial advisor for your specifics, but in nearly every case I have found it to be worth it.\n\nHope this helps!\n--J.
846924
The first thing you should note is that you have an annual personal tax allowance of £5035. This means you do not pay tax on the first £5035 in any tax year. (april-april).\n\nOn the next £2151 you pay tax at a rate of 10%.\n\nBetween  £2151 and £33300 (over the allowance) you pay 22% Tax.\n\nAnything above this you pay 40% tax.\n\nThis means the higher tax band starts at £38,335 (£33,300+£5035). Any income above this will be subject to 40% income tax.\n\nTo complicate matters you pay national insurance at 11% for earnings between £97 and £645pw but this drops to 1% above £645pw.\n\nIf you are close to the higher tax band you may be able to bring yourself back below the band by paying more into your pension. There is no other legitimate way to avoid the 40% demand.\n\nAlso make sure your savings and investments are in tax efficient forms (such as ISAs). This will mean that you don't have to pay tax on your interest.\n\nNote:-\nThis assumes you are below 65 (above 65 your personal allowance increases to £7280).\n\nIncome includes all income including investments (rental income, interest, share dividends etc.) \n\nBe happy with earning a decent wage!
1147141
At 23, time is your best friend (hooray compound interest).  Your best bet is to (if you haven't already,) open up and max out your Roth IRA.  This allows you to allow that compounding to work in a tax-free manner after you deposit. See what a difference that can make here: http://www.dinkytown.net/java/RothIRA.html\n\nIf you work for a company that provides matching funds for your 401(k) or similar retirement account, be sure to get the maximum match - it's free money! (that has to come from your income, but you can use your $10K to buffer your cost of living while you max your contributions).\n\nNote, it'll depend both on your capital gains, and the tax efficiency of your investments, but when I ran the numbers for myself, I found that I was much better off using my 401(k) for investment even though I plan on early withdrawal: http://randomfoo.net/blog/id/4087\n\n(Over a longer time-horizon, the tax efficiency is going to make a huge difference, plus you can also drastically rebalance with near impunity, tax free)\n\nRegardless of the type of account you put your money in, you still have to decide what you're going to invest in.  There aren't guaranteed returns, but for your goals (growth until eventual financial independence, yes?) you're best bet is probably a good index mutual fund. (You'll want to do your own research on this - although index funds are by definition 'average' they tend to provide total returns (after expenses) that beat the vast majority of mutual funds.  Here's one article to help you get started on why that's the case: http://www.fool.com/mutualfunds/indexfunds/indexfunds01.htm\n\nYour best course of action as you save towards financial independence is to continue investing (dollar cost averaging) and to diversify as your capital grows (bonds, international, REITs, metals) and to try to keep an eye towards what your goals are.  A good book on the subject matter is "You Money Or Your Life" by Domniguez and Robin, which talks less about investing (they suggest an extremely conservative approach), but more about a good basic mindset/framework for thinking about money.\n\nIf your goal is early retirement (reaching the point where you can live off your investments) you may also want to take a look at FIRECalc, an interesting early retirement calculator: http://fireseeker.com/ and the related Early Retirement forums (lurking and reading the archives is a good way to dip a toe in the water, so to speak): http://early-retirement.org/forums/