Delayed Distribution Annuity

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TangBandW4
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Joined: Sun Mar 26, 2017 10:30 am

Delayed Distribution Annuity

Post by TangBandW4 » Wed Oct 04, 2017 7:06 pm

My wife received an annuity as beneficiary of her mother's annuity who passed in Jan of this year. The mature TransAmerica annuity is non-qualified. We chose the delayed distribution where we must take a lump sum payout at 5 years if we have not taken anything between now and then. It continues to pay 4.5% interest. Our thought is leave be as we don't need the money over the next five years. Any payouts are subject to taxes of course.

Any thoughts are appreciated!

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Taylor Larimore
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Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Delayed Distribution Annuity

Post by Taylor Larimore » Wed Oct 04, 2017 7:29 pm

TangBandW4 wrote:
Wed Oct 04, 2017 7:06 pm
My wife received an annuity as beneficiary of her mother's annuity who passed in Jan of this year. The mature TransAmerica annuity is non-qualified. We chose the delayed distribution where we must take a lump sum payout at 5 years if we have not taken anything between now and then. It continues to pay 4.5% interest. Our thought is leave be as we don't need the money over the next five years. Any payouts are subject to taxes of course.

Any thoughts are appreciated!
TangBandW4:

Based on the information you provided, I would keep the annuity and consider it part of your overall desired stock/fixed income allocation.

4.5% interest is an excellent return for a safe fixed-income investment.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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David Jay
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Location: Michigan

Re: Delayed Distribution Annuity

Post by David Jay » Thu Oct 05, 2017 11:38 am

A lot depends on the size of the annuity. If it is small then it doesn't matter. My wife inherited an annuity that paid about $2000 a year for 4 or 5 years. No big deal, only about $1200 was taxable each year.

If it is substantial (say, tens of thousands of dollars) then withdrawing everything in one tax year means all of the taxable income (part of the distribution will be taxable) will be in one tax year. That may have the effect of putting you in a higher tax bracket and/or causing a phase-out of certain benefits (like having too much income to contribute to a Roth).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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