1. TAX ADVANTAGED DISTRIBUTION
Reducing Taxes
on Non-Qualified
Annuity Withdrawals

2. TAXATION OF NON-QUALIFIED ANNUITIES
Annuities grow tax deferred
NO taxes due until distribution
Withdrawals are LIFO

3. $160,000 CASE STUDY Betty & Jim $60,000 Growth $100,000 $100,000 CD
65 year old couple
Jim owns a $100,000 NQ CD renewing at .50%.
He uses that $100,000 to purchase an annuity.
$160,000
$60,000
Growth
$100,000 CD
$100,000
Annuity

4. Jim needs $35,000 from his annuity after tax
CASE STUDY
Jim needs $35,000 from his annuity after tax
Betty and Jim are in a 29.25% tax bracket (25% federal, 4.25% state)
$160,000
$60,000
Growth
$49,500
$110,500
Withdrawal
$-14,500
Taxes
$100,000
Cost Basis
$100,000
Cost Basis
$35,000
After Tax

5. What Jim could have done…
CASE STUDY
What Jim could have done…
Instead of putting $100,000 into one annuity, put
$25,000 into four annuities at four different companies
$100,000 CD
$40,000
$40,000
$40,000
$40,000
$15,000
$15,000
$15,000
$15,000
$25,000
$25,000
$25,000
$25,000

6. $40,000 $35,500 After Taxes CASE STUDY Jim needs $35,000 after tax
Cancel one contract
$15,000
$40,000
- $ 4,500
Taxes
$15,000
Gain
$35,500
After Taxes
$10,500
$25,000
Cost Basis
$25,000

7. What does Jim accomplish?
CASE STUDY
What does Jim accomplish?
Reduce taxes from $14,500 to $4,500
Increase annuity value from $110,500 to $120,000
Potentially keep tax bracket lower
10%,
15%,
25%,
28%...

8. Why 4 insurance companies?
CASE STUDY
Why 4 insurance companies?
IRS Code Section 72(e)(11)
Serial Annuity Rule (IRS Aggregation Rule)
If a client purchases more than one non-qualified deferred annuity from the same annuity carrier during the same calendar year, the IRS considers those annuities to be a single annuity for purposes of determining the gain or loss on withdrawals.
Same Client
Same Calendar Year
Same Insurance Company

9. OPTION TO REDUCE FOUR COMPANIES TO TWO Betty & Jim – Married Couple
Option 1: Have Betty be the owner and annuitant for two contracts,
and Jim the owner and annuitant for the other two
Betty
Jim
$25,000
Company A
$25,000
Company B
$25,000
Company A
$25,000
Company B

10. OPTION TO REDUCE FOUR COMPANIES TO ONE Betty & Jim – Married Couple
Option 2: If near year-end, have Betty and Jim each issue one contract in December and one in January
December
January
Betty
Jim
Betty
Jim
$25,000
Company A
$25,000
Company A
$25,000
Company A
$25,000
Company A

11. TAX ADVANTAGED DISTRIBUTION
Thank you for joining us today.
Call Producers Choice for more
information at