Women Generate High Retirement Income Nearly Tax-Free!

IRS Tax Rules Favor Females

One of the lessons that women learn as they make plans to convert their retirement savings into income is that they should plan for lower income than a man might take from an account of the same size.

That’s because women live longer, and they need to ensure their savings last longer.

The IRS, however, is not allowed to consider gender when it writes its tax rules. That means women can use some of their personal (after-tax) savings to buy annuity payments and benefit from their favorable tax treatment. Suddenly, gender is a plus, not a negative.

Payments from an income annuity purchased with personal savings receive a tax break because a portion of each annuity payment is considered a return of previously taxed principal, until the principal has been paid out. Looking at an annuity quote as of Nov. 7, a female aged 70 with $1 million can generate $66,712 per year in guaranteed lifetime annuity payments and be taxed on only $2,535 per year until age 85. After age 85, when payments become fully taxable, she is likely to have larger tax deductions from unreimbursed medical and caregiver costs.

In the example above, 98.5% of the income is received income-tax-free, translating to less than $1,000 a year in taxes.

While men receive a tax benefit, too, it’s not as large as the one for women.

In this environment, generating more income from annuity payments is crucial; paying fewer taxes is just icing on the cake.

Finally, a win for women everywhere.

Click here to get an annuity quote and the tax benefits you can get. Or contact me for a conversation about even more tax benefits.