If your IRA income goes up will you pay more in taxes or less? Usually more! I am not a CPA but with some common sense and careful thought we can decrease your taxes due and increase your IRA income!
If you are a CD investor at the bank and take IRA income you might be able to lower your taxes due. How? Let's take a look.
For example, if you are taking income in the amount of $30,000 per year and you have $220,000 invested in CD's that are not in an IRA consider this idea for example and see if it might fit into your exact situation. You might be taking way more IRA income or have way more money in CD's to work with.
Since I am not a CPA and like to work with easy round numbers let's make it easy for all of us. Your taxes due at 25% of $30,000 would equal $7,500. If you were also earning interest on your CD at 3% you would pay $1,650 on the $6,600 earned from your CD each year whether you take the money out or not.
What if we lowered the need for your income withdrawal to $15,000 by annuitizing all or part of your CD?
You annual payments could easily equal $15,000 plus your missed CD money per year and since you would be getting part of your principal back you would still only pay around $1,650 a year in taxes. You would save $3,750 on your IRA income taxes and saved money is made money so really you end up with $33,750 in IRA income each year plus we could always increase your income to replace the lost CD interest if you need it as well. If not then we would just leave that money in the investment. You might even drop into a lower tax bracket and save even more.
In this idea your IRA can then grow much faster to replace your CD value. You get more money, less taxes, higher growth in your IRA, and at least half of your IRA income is guaranteed now at a certain rate. Your monthly stream of new money can also pass on to your heirs in most cases. Sound good?
If you are interested in taking a look at this idea be sure to check with a competent annuity professional. Most agents and brokers have never annuitized an annuity and don't truly have a grasp as to when it is a good idea due to lack of experience. Be sure to ask about how much experience they have in working with annuities. And remember, there is never a bad time to make more money!
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