Tax Deferred Annuities
By: Joesph Mann | Posted: 20th January 2011
The reverse 1031 exchange becomes the best answer when an investor has found, and is ready to close on the new property. This all happens while the investor is still trying to sell the old, original property. Another reason to setup a reverse 1031 exchange includes securing your new property to avoid the risk of possibly loosing that property. Also this rids yourself of the replacement property "dilemma" once you have sold that old (original) property, because there is a short 45 day window to find a suitable replacement investment property.
Since taxable accounts have a basis which is never taxed when withdrawn, and the fact that tax rates on qualified dividends and long term capital gains are generally low - like 0%, 10%, 15% (depending on your income tax bracket), you'll lose less in taxes when you withdraw money from taxable accounts.
On a personal level none of this bothers us. But in the contest for good renters -- folks who will be caring stewards of the property and pay their rent in full and on a timely basis -- newer properties seem consistently more attractive.
Fixed period contracts are typically easier to calculate than life annuity contracts. In life income annuities, the expected payout amount used to calculate the exclusions ratio is based on life expectancy tables from the U.S. Treasury Department.
On the other hand, you have another investment where you invest under the same exact conditions except that you pay taxes (35%) on the $1000 prior to investing. Your invested amount is now $650 and it will for 10 years earning 6%. At the end, you will have $1164.05. It's exactly the same!.As you can see the, the results are the same. Tax Deferral is not a powerful weapon against taxes; it just delays them.Typically, people like the idea of deferring taxes because they believe they will be in a lower tax bracket in the future.What many don't realize is that they're working to have the same or higher effective tax rate when they retire.
You can look into all different types of IRAs to see which one you qualify for, including: a Spousal Retirement IRA, Deductible IRA or Roth IRA. With both 401ks and Deductible IRAs, you only pay taxes when you start withdrawing at retirement. Most people are recommended to go with their employer-sponsored retirement savings plan if the company agrees to match your contributions.
Close on the new property or properties within 180 days of selling the relinquished property.
Annuities can offer many advantages when compared to other investment instruments. One of these advantages, and some would say the biggest advantage, is tax deferral.About the Author
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Tags: personal level, u s treasury, treasury department