Dallas Tax Planning – Roth Mini Series Episode 4

“We Can Pay from 50% up to Two Thirds of the Taxes From Your IRA!”

That screamer was at the head of a full page advertisement I saw in the Dallas Morning News from a guy in Florida selling income annuities.  What a nifty concept – you let this guy move your money, and he pays a big chunk of your taxes.  What could go wrong?

Well, where there’s income annuities being sold, there’s fine print involved.  First, this guy requires you to move all your money with him.  Next, he’s taking all of your money and putting all of it into one product – a fixed, indexed annuity.  Let’s guess he gets a big, fat bonus for each sale he gets into that product, and it wouldn’t surprise me to see an income rider in there somewhere.

Now, I don’t have a big problem with the income annuities themselves, but putting all your money in just one product to be able to avoid a tax impact at a specific point in time is foolish.  It breaks so many of my rules that I don’t know where to start.  It shreds my Diversity Trinity, and it flies in the face of my Rules of Financial Gravity, just to name two good rules that we shouldn’t be breaking just for a tax break.

Be very careful if someone tells you they are going to pay your taxes while rolling all your money into income annuities.  It can be done, and in some cases it may even be a good idea.  In the next section of this article series, I’ll give you some rules of thumb you can use in order to decide if this kind of move is going to be right for you.  Here’s a sneak peek: it’s probably not a good idea for a large portion of your assets.