Variable Annuities Look Pretty Good at Tax Time
February 13, 2023 by Scott Stolz
Tax season is here, and so are the difficult 1099 talks with clients. Having to explain to a client that they have to pay capital gains taxes despite staring at negative 20% returns is never a fun conversation.
“Let me see if I have this straight: My investment in XYZ fund has gone from $1 million to $800,000, but I have to pay $25,000 in taxes? In what alternate reality does that make sense?” Not fun at all.
Click HERE to read the full story via ThinkAdvisor
Wink’s Note: Before my good friend Scott Stolz, CFP, RICP began working for iCapital, he wrote a book about annuities. I just got it in my Amazon last week.
And while I still haven’t cracked the spine open on that book, Scott is educating me nonetheless.
“Yes, I will eventually pay taxes on what are now pretty substantial earnings [in my Variable Annuity]. And yes, those taxes will be paid at the ordinary income tax rate rather than the long-term capital gains rate. But how much extra money will I have because every penny I would have had to pay in taxes over the years is still sitting in my account, compounding away?”
Excellent observation.
I would note that while Scott was able to reposition some assets into his VA, once he was in his 50’s, your clients may not have that option. Insurance companies got wise to folks moving monies into their VAs, after purchase, and began restricting subsequent payments after 2008’s market collapse.
Good stuff, Mr. Stolz. Thanks for the ThinkAdvisor read. – sjm!