• IRA
• TSA (403-b)
• SEP (Simplified Employee Pension Plan)
• Pension Plans (Defined Contribution and Defined Benefit)

• Income taxes have been paid on the principal
• Funds may be in a checking or savings account.
• Often funded with transfers from a CD,Mutual Fund, Stocks or Money-Market Funds
• No tax deferral on corporate owned annuity earnings.
• Life Insurance Proceeds are often placed in annuities.
  • To be held tax deferred until payment at a later time.
  • To provide immediate income for beneficiary’s lifetime or for a certain period.

1. Withdrawals
   You will pay taxes only when interest is withdrawn. Withdrawals from annuities are taxed in one of two ways depending upon when the annuity was issued. Annuities issued prior to 8/14/82 had FIFO accounting (first in, first out). Since principal was first in, it came out first, tax-free. With annuities issued on 8/14/82 and thereafter, taxation changed to LIFO (last in, first out). Simply put, withdrawals are now taxable since interest is withdrawn first. Many of your clients will appreciate paying taxes only when interest is withdrawn since most of them are now paying taxes on interest even if they don’t withdraw it.
   
   
2. The 10% Excise Tax Penalty
   Just like an IRA, there is a 10% excise tax penalty on premature withdrawals. The government extends tax advantages to the annuity for retirement purposes. The government also extends tax disadvantages to taxpayers who do not use the annuity for retirement. All interest withdrawn prior to the owner being age 59½ will be subject to a 10% excise tax penalty.
   
   Are there exceptions? Yes, here are some of the most common.
   Six Ways to Avoid the 10% Excise Tax Penalty
   1. Don’t withdraw until owner is age 59½
   2. Disability of taxpayer
   3. Distribution from a pre 8/14/82 annuity
   4. Death of owner (may not be owner’s preference)
   5. Payout from an immediate annuity
   6. Substantially equal payments over taxpayer’s life expectancy
   
   
3. The Exclusion Ratio
   When and if the owner annuitizes (applies their annuity value toward a payout option), the annuitant will receive equal monthly payments. An exclusion ratio is applied to each payment received. A percentage of each annuity payment is considered a return of the owner’s cost basis (principal) and is tax-free. The balance is taxable.
   
   
4. 1035 Exchanges
   One unique tax advantage with annuities is that you can transfer money from one annuity to another annuity income tax-free. The provision in the Internal Revenue Code that allows this is section 1035(a). However, great care should be exercised when making a 1035 exchange.
   
   Five Important Tips for 1035 Exchanges
   • Beware of surrender charges when making an exchange
   • Exchange the entire annuity when possible. In many cases, you cannot transfer a portion of the annuity. Some insurance companies (including GILICO) will accept and make partial 1035 exchanges.
   • If there are loans outstanding, repay all loans before exchanging.
   • Parties designated in the old contract as owner, annuitant, and beneficiary must be the same in the new contract. “Joint owners” in the old contract must retain their same percentage ownership in the new annuity contract.
   • You should consult with your tax advisor before making the exchange.

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Just Say NO to 1099's

Nothing beats the power of tax-deferred growth! If you are just reinvesting the interest from your CD, you're losing out on 33% of your growth!

Unlike a bank CD, an annuity offers interest that grows tax-deferred. No income taxes are due until the funds are withdrawn. The graph below shows the difference this tax-deferred advantage can make. If you are still paying taxes on your interest, you'll be pleased to know that there is a sensible alternative.

This calculation assumes $100,000 invested at 5% effective annual yield tax-deferred compared to 5% EAY in a 33% tax bracket.

With a GILICO annuity, you can take advantage of triple compounding. You will:

• Earn interest on your money
• Earn interest on your interest
• Earn interest on the money you would have lost in taxes

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When does 5% = 7.46%? When you're in a GILICO tax-deferred annuity!

Formula for After Tax Yields:

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Are you Tired of Paying Taxes on Your Social Security Benefits?

Did you know that you could be paying taxes on up to 85% of your Social Security benefits?

If your combined income (50% of your Social Security payments, plus all other income (including tax-exempt interest) is between:

Case Study:

In the above example, the total assets of $50,000 exceeds the $44,000 limit for married couples, and therefore this family is paying tax on 85% of their Social Security benefits. If they aren't living off their investments, a GILICO annuity is a much better place for their money.

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Do You Want Your Heirs to Get More of Their Fair Share?

Another important benefit of an annuity becomes apparent should the annuitant or owner pass away. At death, the value of a GILICO annuity (with properly designated beneficiary other than the annuitant’s estate) is passed on to heirs without the expense, delay and frustrations of probate.

Proceeds from a non-IRA bank CD, on the other hand, can be subject to:

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What Happens to My Money If I Die?

• When Owner & Annuitant are the same person, the money goes directly to the BENEFICIARY
• Options if HUSBAND or WIFE is Sole Beneficiary:
  1. Change Name of Owner - Annuity Continues - No Tax Due (Spousal Continuation)
  2. Cash Annuity In - May have a Company Penalty - Taxes are Due
  3. Periodic Pay Out - No Company Penalty - Tax Due as Received
• Options if Any OTHER PERSON or ENTITY (Estate,Trust, etc.) is beneficiary:
  1. Cash in - May have a Company Penalty - Taxes are Due
  2. Periodic Pay Out - No Company Penalty - Tax Due as Received
  • Payout Period May Not Exceed Life Expectancy of Individual Beneficiary
  • The Decision Must Be Made Within 60 Days After Death of Annuitant or Owner
  • Payments Must Begin Within 1 Year of Death

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How Annuities Compare to "the Competition"

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