The Tax Man is Here, Yet Again
Posted by Ray on April 15, 2008 under Main | 
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Today is the last day to mail your taxes and as many people now know their investments also come with tax liabilities. Many people will tell you that investing in mutual funds is a better idea than using a variable annuity because of the long-term capital gains treatment. The irony is that the long-term tax treatment is only relevent to sales of your mutual funds that are more than 12 months old and only on a portion of your total mutual fund distributions.
The vast majority of your distributions from your mutual fund account was probably short term income distributions. That means that the gains from this account will be taxable at your ordinary income tax bracket, not the famed 15% long-term capital gains rate that many claim you will be taxed at.
With turnover rates of mutual funds hovering around 100% annually it is highly unlikely that you will pay long-term capital gains on your investments in the future, unless you sell your fund. To add insult to injury the sub-prime meltdown has handed investors hefty losses on their mutual funds and now they owe taxes on a fund that lost them money.
With a variable annuity you would have circumvented both of these situations. The tax deferral would have shielded the investor from taxes and a living benefit would have preserved the investors income or principal, depending on what type of benefit they bought. To find out what type of benefit is right for you go to Annuity IQ to find out more.
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