Will the Taxman Attack Annuities?


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Both federal and state governments are looking enviously at the $3 trillion on the annuity books, and Stan the Annuity Man explains what investors need to know.

Will new tax law changes affect annuities? I'm here with Stan the Annuity Man and he's going to tell us.

Well, if you look at it realistically, there is $200 billion worth of annuities sold every year. There's $3 trillion that's been sold.

Now, if I'm a politician in Washington, I'm looking at that and I'm going, "Wait a minute...that's a big number." So they're looking at how to tax that without offending voters. Let's just be honest.

There are two states that have already implemented what's called a premium tax on income with your annuities. In other words, when you start taking income from it, they're going to put a little tax there. You can probably guess who started that. It started in California. Nevada's the second one that does that.

But now you're going to see states-because annuities are regulated at the state level-they're going to start looking at how to create income streams, income and revenue from annuities. Because with the baby boomer population, and 10,000 of them retiring every day, and they're going to contractually guarantee products that produce lifetime income streams...the states are going to say, "Wait a minute, that's a big number. How do we go and tax that?" But that's what's coming.

 Right. So it's not as much the federal government that annuities are taxed at?