Tax Free Annuities, Limited Supply!

Today, we are talking
about tax-free annuities. Dick: Better get them while they last, Eric. Eric: They are in limited supply. When their
shelves are empty, they are all gone.

Dick: That is right. Eric: You better act quickly. Dick: How about that? Tax-free annuities;
isn't that the opposite of what we're told? Stereotypically, annuities are
taxed at ordinary income tax rates, just like IRAs. Eric: You know what the CPAs are calling right
now, "They are wrong.

The tax-free annuity doesn't exist." Dick: Our phone's going to be blowing up. Eric: They'll tell you it doesn't exist. I
have not seen anyone advertise for a tax-free Annuity. Dick: Here we have a limited supply.

Eric: That is right; we've got them in short
supply. Dick, you got to tell us, how does one get one of these limited
supply annuities? Dick: Here we go. What we have is no different
than what you have, and that is you have your traditional IRA, that IRA
can be converted to a Roth, of course, you will have to pay your tax the
following year. Eric: They are not tax-free then.

Dick: You have to pay the tax in the IRA. Eric: It's the first, okay. Dick: Folks, once that you've actually converted
to the Roth, you can then put that money into an annuity. That annuity
becomes fully tax-free.

It can give you a tax-free income for the
rest of your life; it can pass tax-free to your heirs. It can actually
become a retirement account for your heirs. There's some intricacies
to that, which we can talk about. The idea of using a Roth strategy
in an annuity is not that well-known, it's not talked about that
often, and it can be a great advantage.

Eric: We say limited supply; why do you say
limited supply? We've Roths for how long? There's been a recent change though,
it used to be there was an income threshold out there. Dick: In 2010 they wiped it out. If you make
over $100,000, it doesn't matter, you can convert. Limited supply, we're
having a little fun with this, folks, like an annuity sale.

The
limited supply really comes down to Uncle Sam giveth . . . Eric: And Uncle Sam taketh away.

When someone's
looking for tax dollars . . . Dick: Our government needs money.

Eric: If you believe taxes are going up, raise
your hand. If that is the case, is better to then . . .

Dick: It is likely that Roth could be an endangered
species. Eric: Roth will turn to Moth. Dick: It could. Eric: It is going to mothballs very soon.

Dick: Getting poetic. Eric: Yes, I am trying to rhyme. Dick: If we're in this situation where taxes
were likely to rise, the government is looking for revenue, the Roth
advantage benefit could be closed, tightened up. What we really experienced
in the past Eric, with various insurance products and tax advantages,
as long as they were entered into legally and under IRS and
government-type sanctions, then usually, there was a guy in there who
grand fathered in.

It's the new folks coming in that were somewhat penalized. Eric: usually, they won't go back and try
to take it away from you, usually. Right now we believe that if people
get it in before the government decides that this money is too
tempting, we've got to reach in there and get [inaudible: 03:46]. Dick: We can just let these people this tax-free
advantage.

Eric: Or their kids or their grandkids. Dick: That's where we go into it is potentially
limited supply. Folks, this is something you genuinely want to consider,
you want to use an advisor that really understands the Roth-IRA,
the tax advantages, and the ways to incorporate that into annuity.
Eric, I'd like to point out another thing while I'm thinking about it
here; there's different ways to convert an annuity to a Roth-IRA. We could
use an existing annuity that's an IRA.

Eric: You are saying if I own an annuity that
has an IRA wrapper with it already . . . Dick: You can convert it.

Eric: I don't have to convert the annuity?
I don't have to go get a new annuity? Dick: You do not. You can actually convert
that annuity in to a Roth. Even better, in some situations where you're doing
proper planning and you know in advance that you're going to be converting
this, you may want to go ahead and convert your Roth inside your
present account then transfer the Roth into an annuity, if that
was the purpose or the reasoning; pick up that 10% bonus, tax-free,
8% bonus, or whatever you get with the annuity. Again, as maybe you
have an income rider.

I'm getting too much here Eric: I just got a tax-free bonus. Dick: It is just the whole package of being
tax-free, and the fact that if you put an income rider on it, that you're
going to have potentially tax-free income. Even if your account value
goes to 0 because you have lived a long, long life, your income will
just continue tax-free. Eric: Obviously, there are standard benefits
of the Roth that you don't have to worry about RMDs; the transfer of
wealth tax-free.

In many ways, it [inaudible: 05:44] life insurance.
One thing that I was looking at earlier was the Social Security
Tax aspect. The reason that comes into play, even with annuities with
IRA wrapper, a lot of times you are going to take those RMDs that are
going to kick that Social Security income level to a level that's taxable. Dick: It really can push it up in to that
taxable. Eric: If that is one of the things you can
potentially avoid by converting it into a Roth, there's even sometimes that
it's .

. . Usually, the rule of thumb used to be you want to be able
to pay for that conversion, those taxes basically, out-of-pocket.
You don't want to reduce your balance. Dick: Exactly.

Eric: Some of the formulas that we've looked
at actually said, "You can save more on the backend by not having those
RMDs force you in to a higher taxable consequence." Now we're talking
all sorts of fun things. Dick: I think a lot of it, Eric, gets down
to; do we believe taxes are going to go up? If you believe taxes are going
up, folks, raise your hands. It's unanimous, no hold-outs. Most
rational folks .

. . Eric: And some irrational. Dick: .

. . Believe that taxes have nowhere
to go, at least for the next 10 or 20 years, but up. It's a perfect place
to look at Roth and say, "Whether I'm going to use the money or I'm
going to pass it to my heirs, I want to protect them from increasing
taxes." Eric: If nothing else, it needs to be one
of the things you consider for your retirement future, is how it will impact.
Work with a good advisor, discuss the possibilities, and it
should be one of those pieces that's on the table.

Taxes are going
up; limited supply. Dick: That's right. Get them while they last.
Thank you. Eric: Have a great day..