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A common concern many people have regarding fixed income annuities is in regards to their tax treatment. The concept behind fixed income annuities is actually quite simple. A fixed annuity is simply an insurance product which pays out a fixed income over a specified period of time. This payment is determined at the time of the contract and typically does not vary.

A feature of the fixed annuity that many retirees find to be most beneficial is the ability to turn the contract into a life annuity. A life annuity is designed to provide a set income for the duration of the annuitant’s life, regardless of the number of years they have left.

The basic tax treatment of fixed income annuities can be considered relatively simple, whereas as with most other tax questions, the details can get rather complicated. Most annuities enjoy tax-deferred growth, and are only taxable upon distribution.

This means that any growth inside of the account during the accumulation and distribution are not taxable until the money is taken out. Needless to say, tax deferred growth can be a significant boost to the overall value of the account.

To determine the tax treatment of an annuity, you must separate it into two sections, taxable and nontaxable. The taxable portion is determined by the exclusion ratio established by the IRS. Take the total amount expected to be received by the annuity and divide it by the amount invested in the annuity. This ratio is then applied to each distribution to decide the applicable taxable and nontaxable amounts.

In a broad sense, the non-taxable portion of the account is the dollars that were paid for by premiums paid into the annuity. The taxable portion deals with the growth of the account and any distributions that exceed the total paid in.

A life annuity contract is generally more difficult to calculate than fixed period annuities. The difficulty with a lifetime annuity is determining the expected payout. Life expectancy tables prepared by the U.S. Treasury Department are used to determine life expectancy of the annuitant.

Though there are certainly disadvantages to fixed income annuities, the fixed annuity can be a very valuable resource for retirement planning and preservation of your hard-earned capital. The lifetime income guarantee that many annuities provide can give the investor a level of security, confidence, and low-risk growth that other vehicles cannot provide. Couple this safety with the tax-deferred treatment of fixed annuities and this insurance product can become a very effective financial planning tool.

Be sure to check out Brian Atkinson at The Fixed Annuity Guide to learn more financial planning topics. The fixed rate annuity can be used in a multitude of creative and powerful ways.

categories: fixed annuity,annuity,fixed income annuity,finance,insurance,financial planning,retirement,tax planning,investing,personal finance,money,banking,taxes,business

Here are the historical facts of a case study regarding a practitioner of the Infinite Banking Concept as outlined in the book, Becoming Your Own Banker, by R. Nelson Nash.

A 45 year old male

He put $30,000 in the form of an annual premium into a mutual participating whole life insurance policy promising $567,000 to his family in the event of his death.

Two weeks later he borrowed $12,000, of the $22,000 of available cash value, from this policy

He took his loan of $12,000 and used it to pay his tax bill. Next he drew up a schedule for repaying his policy from which he had borrowed.

His repayment schedule specified that he would pay back this loan over a course of 36 months with a monthly payment of $390. At the end of this time he had paid back $14,040 and now had this money available in addition to the $10,000 of cash value that did not loan from his cash values originally.

After a 3 year period, he has paid two more premiums of $30,000.

After paying the second premium of $30,000 his cash values were increased by $24,000.

After he paid the third premium, another $34,500 was added to his cash values.

Now he has $82,540 in cash values besides the $801,000 of face value. At this time, he has only paid $90,000 of premiums, so really his cost has simply been $208 per month or $7,460 in all.

Compare this to a term policy with an $800,000 face value; his cost for this would have been $323 per month or $11,628 for an equal time period.

This continues to improve because remember the $10,000 of cash value that this man left inside his policy when he took out the $12,000 loan?

That $10,000 was used, with another $20,000 of cash on hand, to purchase an automobile. The monthly repayment schedule on that automobile was $667.33 per month. This means that after the same 36 month period of time mentioned above, this fellow who is now 48, has an additional $24,024 of cash values. $24,024 plus $82,540 comes to $106,564. This is $16,564 more than what has been paid in total premiums!

Summary:

This man now has $16,564 more than he would have had originally!

Plus over $801,000 of life insurance that has really cost him nothing.

Now he has paid his tax bill of $12,000, plus he has a $30,000 car!

Just in two years, his accumulation will have swelled by an additional $16,016 as he continues to make the monthly payment on his car.

Finally, because he has been utilizing the Infinite Banking Concept and practiced Becoming Your Own Banker, his face value has gone up from $801,000 to $812,424.

Because he learned to control the banking equation, he has received, tax free, all the profits which would have gone to the banking and financial institutions.

What this case study proves is that the “return of your money is always more important than the rate of return on your money.”

So The Infinite Banking Concept is truly fact not fiction

Tomas McFie PhD. of Life Benefits, Inc. Is a widley sought financial coach. He helps people and business owners recover 30-35% of the money they are currently spending through the practice of the Infinite Banking Concept as described in the book Becoming Your Own Banker

categories: Money,Taxes,Autos,Finance,Insuranc,Payment schedules,Infinite Banking Concept,Becoming Your Own Banker,IBC

If you are stuck in a horrible debt you have to change your lifestyle and learn how to manage your money better. Here are just 7 debt free tips to get you started:

1)Never use a credit card to live until the next paycheck arrives. If you do it all you will achieve is to get even more deeper into debt. If needed take a second job but don?t borrow money to life or even worst to pay off your existing debts. Just figure out a way to make a couple of extra bucks each and every month.

2)Never pay more than you owe that month. Even if you have the money to pay to installments don?t do it. Make sure you have enough money to buy food and pay your current living expenses. The excess money use it to make even more money.

3)Add up all the money you owe and create a schedule for paying off each and every debt that you are currently having. Map it all out and then get to work on doing everything in your power to make the plan become reality.

4)You should reward yourself each end every time that you achieve one of your get out of debt goals. But don?t reward yourself by spending a lot of money. If you can don?t spend any money at all. Use your imagination to find cheap rewards that will please you.

5)Plan all your future expenses. If you know you have to spend money on something plan it out ahead of time. Find a good way to make some extra money or figure out a way how to save up all the money you will need in the future. Why give yourself headaches in the future when you can do something to prevent then now.

6)Get rid of all your excessive credit cards. It can be really therapeutic cutting your credit cards with a big pair of scissors. You should definitively give it a try. I did this a long time ago and it was fabulous. I felt so liberated afterwards.

7)Pay the smallest amount of money you can to your lenders. If needed use the service of a good credit counseling service to help you negotiate and come to an agreement with your lenders.

The bureau recently free guidance, in a question and respond format, addressing how employers are to lot and essay recovery of the new COBRA payment subsidy enacted under the American ecovery and Reinvestment Tax Act of 2009 (P.L. 111-5). The Act provides that an individual who has been involuntarily terminated on or after September 1, 2008, through the end of 2009 is required to clear only 35% of the group health shelter payment to bonded COBRA continuation coverage (up to nine months).

The new guidance focuses on digit broad areas: Form preparation – the mechanics of how an employer recovers the COBRA payment subsidy through a payroll credit claimed on bureau Form 941, and administration and eligibility. The guidance also addresses common inquiries surrounding the timing of when the subsidy begins and ends.

How The Subsidy Will Work: Former employees and their family are “assistance eligible employees” if they are eligible for COBRA health insurance continuation coverage as a result of any involuntary termination occurring from September 1, 2008, through December 31, 2009. Those individuals are required to pay only 35% of the group health insurance premium that would otherwise apply.

Under the new guidance Act, the “person to whom the premiums are payable” – generally, the employer – pays the other 65% of the COBRA continuation premium. The employer will then be reimbursed by means of a federal payroll tax credit claimed on Form 941.

Payroll Credit Usually, an employer can claim the payroll credit for the COBRA premium subsidy on Form 941, Employer’s Quarterly Federal Tax Return. To do so, the employer should enter the amount of any COBRA premium assistance payments paid on behalf of employees for that quarter on Line 12a. The amount entered should equal 65% of eligible workers’ total COBRA premium payments – not amounts received from former employees.

In its Guidance, the bureau indicated that there has been some fault surrounding the proper sort of individuals to be reported on Line 12b as having received COBRA payment assistance reported on Line 12a. The guidance clarifies that only one individual should be counted for Line 12b purposes in a situation where a past employee has also secured coverage for other qualifying individuals much as a relative and/or children.

Timing Issues: The IRS has also clarified that the COBRA premium reduction applies as of the first period of coverage beginning on or after February 17, 2009, for which a qualifying involuntary terminated employee is eligible to pay 35% of the premium. The exact date of coverage is contingent upon the period to which premiums are charged to the plan. The 35% premium subsidy generally applies until the earliest of three events: (1) when the former employee secures other health insurance coverage; (2) the date that is nine months after the first day of the first month for which the special COBRA premium subsidy provision applies; or (3) the date the individual is no longer eligible for COBRA continuation coverage.

…and find out what many will never know.

“What I am about to share with you makes so much sense that you will probably get mad that no one ever mentioned it to you before now.”

Perhaps, Sam Walton said it best, Capital is not scarce vision is.

In 1829 John Q. Adams wrote:

All the perplexities, confusion and distress in America arise from downright ignorance of the nature of coin, credit and circulation.

Well, people are still perplexed today, by the same thing John Adams referred to when he wrote that statement back in 1829! All this is because the population has been kept in the dark about how banking really works. This is not an earth shaking thing. The disease of money and banking can be found throughout the Unites States. John Maynard Keynes had this to say:

There is no subtler or surer means of overturning the existing basis of society than to debase the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a manner which only one man in a million is able to diagnose.

If Keynes a widely recognized economist of his time said it would take one in man in a million to be able to recognize this problem, don not kick yourself too hard because you did not recognize this before now. But do take a deeper look at reality so that you will be able to recognize the facts so you can stop throwing money away.

This is a different way to think about things, people regularly bid goodbye to 30% to 40% of every dollar they earn (that is after taxes.) This is because everything we purchase has a financing cost. That is correct! This is why; either people use money belonging to someone else and have to throw away their money to pay the interest, or they pay cash outright and lose all the interest that their money could have made for them. Both ways can be depressing. This is the banking equation revealed!

But you know, it does not have to be that way. It has been proven time and time again, that the method of using life insurance cash values as a personal banking system works. By Becoming Your Own Banker, utilizing the Infinite Banking Concept as explained by R. Nelson Nash, you can capitalize on your own debt just like the banks and financial institutions do right now, only you will be the winner this time around not them.

…and find out what millions will never know.

I am going to share with you a concept that makes so much sense; it might make you angry that nobody ever shared it with you before now.

Perhaps, Sam Walton said it best, Capital is not scarce vision is.

The Sixth president of the United States, John Adams, once said:

All the perplexities, confusion and distress in America arise from downright ignorance of the nature of coin, credit and circulation.

The same thing that John Adams mentioned in 1829 holds relevant to today. People are still bewildered. This is because they do not understand banking and how it really functions. They have never been exposed to this truth. However there is no reason to be troubled about this. Misunderstandings about banking and money are prevalent here in America. John Maynard Keynes said:

There is no subtler or surer means of overturning the existing basis of society than to debase the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a manner which only one man in a million is able to diagnose.

So, if one of the most famous economist of our time once said, it is only one in a million that would be able to diagnose this disease, do not throw a pity party about not picking up on it. But please do take a moment and sharpen up on your diagnostic skills so that you will stop throwing your money away!

Take an honest look at your situation. You routinely throw away 30% to 40% on every dollar that you earn (after paying taxes.) This is because everything you purchase is financed. Check it out! You either pay interest to others so you can use their money; or you lose the interest that you would have earned on your own money. Either path you take suffers defeat. This is the effect of the banking equation!

Of course this is not the way things have to be, it is a proven fact that the using cash values from a life insurance policy as your private banking system is very effective. You can Become Your Own Banker through the practice of the Infinite Banking Concept. This is explained in the book, Becoming Your Own Banker, by R. Nelson Nash. By practicing this concept, you will be able to capitalize on your own debt, but this time you will be the winner not the banks and financial institutions.