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Originally Posted by CJ7
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Are you actually familiar with the proposal or did you actually read the entire article?
What's the difference between a government regulation forcing you to convert your CASH asset to an ANNUITY and the government confiscating your CASH are replacing it with an ANNUITY? If it is difficult for you to grasp legally, let me help.
NONE!
It is based on the "theory" of liberal thinking that "regular people" don't know how to manage their money and it is "better" for "regular people" if the government FORCES them to have THEIR MONEY dribbled out over their life time as opposed to having THEIR CASH available for them to withdraw whenever they desire to do so for whatever reason THE OWNER wants.
Think the current social security system ...
If someone has a $100,000 401K and the government reg requires them to buy an annuity contract with it to guarantee $1,000 a month (to be taxed as real income) then that is 100 months of payments + additional months depending on the earning rate for the fund. So lets make it 120 months or 10 years. They begin at 67. After five yars the OWNER dies. What happens to the other $50,000 + earnings?
Passes to beneficiary/heirs.
What if the $100,000 is required to be used as an annuity. What happens?
#1: Upon the recipient's death, remains with the company holding the annuity contract as real income, and the government taxes the "earnings" to the company based on the company's tax rate established for gains from the investment by the company.
#2: During recipient's life, the recipient cannot withdraw or borrow against it, because the "annuity" is not an "asset" of the owner.
Discuss it with your life insurance agent (if you have a reliable company issuing it as opposed to "DreamLand Life") ... "whole life" vs. "term life" ... the former has "cash value" and the latter does not.
Would you take a $100,000 face value paid up whole life policy and convert it to a $100,000 face value "term life" policy?
On this topic, for those with 401K's or "cash" retirement accounts of any kind, the early withdrawal tax rate is poised to substantially increase prior to any penalty being imposed, and a withdrawal will be considered as actual, current income for the year of withdrawal (regardless of age) ... so the "deferred" tax benefits of pre-tax deposits will evaporate and be taxed at a higher rate than when it "could have been taxed" at the time of deposit.
Find a CPA (tax attorney) as opposed to some bookkeeping service or franchise tax business (with fresh trained data entry hires). And don't wait until next year (After December 31st) to do it.
Read those two concepts together ... IF YOU DON'T buy an annuity with the 401K and draw down on it ...they are gonna "stick it to you" with the increased taxes and penalties. The Nanny State punishment.
