Spotlight: No detail too small in plans to retire

No detail too small in plans to retire


I am 65 and have an annuity that matures this year. I have a number of options for the payout. How are the payments taxed?


You should consult a qualified accountant who can run through the options available on your specific contract. The way the money will be taxed depends on a number of factors, including whether it is in a qualified retirement plan and how you will get the payout.

You likely have a choice to “annuitize,” or turn on a stream of payments for the rest of your life, or to take the money as a lump sum or installments over a defined period, said Mark LaSpisa with Vermillion Financial Advisors in South Barrington, Ill.

If you contributed after-tax dollars to fund the annuity and decide to take a lump sum, the earnings on the contributions will be taxed as ordinary income for the year you get the money, LaSpisa said.

If you annuitize the money, it generally comes out as an income stream for life made up of non-taxed return of principal and a prorated amount of tax on the earnings. Other payout options might generate taxes on the entire withdrawal until all the earnings in the account have been withdrawn.

By Janet Kidd Stewart, who writes The Journey, a weekly personal finance column on saving for and living in retirement, appearing in the Chicago Tribune.
Posted to, on July 13, 2014

No detail too small in plans to retire – Vermillion Financial Advisors, Inc.

No detail too small in plans to retire