I would be a little cautious about buying something from someone that travels about making sales pitches.

Now about that "gift" of property from your mother. How long did you have it? What was the value at the time of the gift? Has the value gone down since the gift? Were there improvements on the property? There are so many questions about this that you do need to investigate very closely. Your capital gains bite may not be a big as you think it will be. Also, capital gains taxable regulations are changing.

If you have to sell soon, put the money in CDs until you have made up your mind as to what you want to do. No matter how it is set up, the chances are that you will have to pay taxes somewhere along the line.

You can buy annunities, both taxable and non-taxable from a bank. Banks are not as apt to go out of business as some company that may or may not be reliable. The returns may not be a great as those promised by others, but they will probably be far safer.

I would seek out the advice of an investment counsoler at two or three banks in your locality and forget about the guy that travels about trying to sell something for his company. You are wise to wonder about the safety of his company.

Thanks Aileen for your reply. This property was part of the farm where we live when I was a child. My parents bought it before I was born and the main part of the property was sold in 1949. We kept about 8 acres, about half of which is swamp land. My mother put the deed in my name in 1964. I sold an acre of the property in 1996 and had to pay 28% capital gains on the entire purchase price. Because my mother gave me the land, the capital gains had to be figured on the whole sale price of the lot because they would have to go back to what my parents paid in 1936 for the property. There are no improvements on the property. It has totally gone back to woods. It has 2 small ponds on it and the back side is swampy. It borders two roads and is located 30 miles from a major city. Property values have gone up a lot in the past few years and building lots are selling at a high price at the present time. My land is the only vacant land in an area that lots of people want to locate to.

Ah, gee!! that's a tough one. Under the circumstances, if you could hang on to it, you could probably get more for it later as property in your area gets used up. That would be nice, but it is also a gamble isn't it???

I really believe that we are going to see some changes in the capital gains laws. People complain that it's just for the rich, but really, it helps far more people like you that have a small piece of proberty instead of stock and bonds. I know if you had gazillions in dollars, you wouldn't even blink at what the caital gains tax was.

Good Luck with what you decide.....Oh, and looking at your "MY PAGE" I see we share the same birthday. Aug 5th is a great day to be born in my opinion. LOL

I think when you reach a certain age they have to start funding you your annuity. I wonder if they offer you choices or do they just have set rules for disbursing it?

This Canadian doesn't know U.S. rules about the subject of annuities.

Especially regarding tax consequences of the transmutation of a piece of property carrying a potentially high tax liability into an annuity.

Whether the purchase of a vehicle whose purpose is at least partially to support one's retirement needs would have a major effect on the current tax liability.

An annuity is you giving a major pot of money to an entity, usually an insurance-related agency, in return for their guarantee to pay you a pre-determined amount on a regular basis (usually monthly, sometimes quarterly or annually) for a certain contracted period. Sometimes the "guaranteed period" is till death.

In some cases you can provide the asset now, with the understanding that the initial payment would be deferred - you'd begin to collect at a certain pre-determined time, e.g. age 63.

Should you become disabled at age 60 and unable to work - tough cookie - no payout till 63, if that was the original contract's provision.

A regular annuity would agree to pay you that pre-specified amount, possibly monthly, as chosen at the time of purchase, for that specified period - often for life.

If you die next month, the issuer smiles - and keeps the rest of the pot of money that you'd given them.

So - many ask for a guaranteed payment period of, say, 10 years. In which case a specified beneficiary or your estate would receive the rest of the guarantee - whether regularly for 9 years and 11 months or, more likely, agreeing to accept a payment in full now of a reduced amount, being the amount needed to underwrite the cost of making that ongoing payment to your beneficiary/estate.

In which case - as there are extra contingencies that might cost them more money - the amount of the regular payment that they'll offer is reduced.

Or, one can choose to have the income support both members of a (usually aged) couple for life. Resulting in another reduction in the amount of the regular payment that they're willing to offer.

With a life insurance policy, you bet that you may die, and they assume that you'll probably live.

Here, you're betting that you're going to live long enough to receive full benefit of the amount you'd invested - possibly more, if you live longer. They bet you're going to die sooner, rather than later.

In each case - they've got the actuaries.

Once you set up the originally agreed plan, it's pretty well set in stone - almost impossible to change it.

I've never been in a strait-jacket or handcuffs - and have no desire to arrange to be in them.

One of my main emphases as a financial planner has been to encourage folks to learn how to manage their own money. I charge for my time - sell no financial products - so my clients don't need to worry that I'm trying to sell them some financial product - which in most cases is one of often a limited selection that they sell, out of a great variety available.

Another reason that I don't like an annuity at this time is that the rate of the agreed payout relates very closely to the level of interest rates available at the time that the annuity is set up.

And interest rates are at historically low rates, just now. But if interest rates should rise substantially in the next few years - which they may do, for the U.S. government is running large deficits currently - and promising tax cuts. Which usually results in inflation, so interest rates rise.

But - the person who arranged an annuity at present will be stuck with that low level of payout rate from here on.

An old lady of past 80 told her nephew and niece of her idea of buying an annuity. They called her financial planner in another city. He spoke of the idea that the basic annuity dies at the death of the annuitant. They thought not. He cancelled another appointment to visit her, as the contract was about to be finalized.

They asked the agent selling the annuities how much residual value there'd be on her death - "Oh, they didn't make such guarantees!". On that type of contract.

Good wishes to all,

joyful guy/Ed

PLEASE don't base your financial decisions on the say so of a salesman who is trying to sell you a product!!!

Call your accountant NOW, make an appt., sit down with him and find out exactly what your tax liability will be. Whatever it is, it's not going to be 100% of the selling price--you're going to make something off the property no matter what, I'd bet. Then, get and take the advice of your accountant as to how you can reduce your tax liability--there are many, many legal ways to do so, if you go to a qualified professional. You still have time this year, to get your ducks in a row, so you lower the amount of taxes you'll be paying.

But really, most of these so-called financial advisers, are salesmen, who's main job is to advise you to take money out of your pocket and put it in theirs. You need to get an honest opinion from someone who isn't going to make money from telling you the best way to procede.

As to annuities? I have one, but only because it was left to me as part of an inheritance. Looks, though, as if this one, at least, is pretty safe--they've told me exactly how much I'll be getting, per month, for the next 30 years. It's a very definite figure. I'm assuming they're well-regulated

Your annuity is as good as the issuer ... usually an insurance company.

If it dies - so does the annuity.

Almost always ... unless there may be some kind a bail-out (not common).

ole joyful

When my husband retire investors were calling all day every day. We let one come over to see what he had to offer. He tried to sell my husband an annuity. The man explained that they would put our savings in a fund so that I would receive a lifetime pension check after my husband died. My husband said that sounds like a good plan. I turned to the man and asked "will we be able to get our money back if we needed it?" He said no.

And before anyone tells me there are different annuity plans. I know that. We decided to leave our money in CD's and start spending it.

We are Cdn. and won't be buying annuities. Old Joyful makes some very good - and accurate points re annuities in Canada.

Annuities are a poor investment choice simply because the rates of return are low. Insurance agents love to sell them because the commission rates are good (which is part of why the rates of return to the buyer are unattractive).

An annuity from a big insurance company is as close to risk free as anyone would want.

It's an archaic vehicle, losing popularity and probably soon to fall by the wayside (at least in the US).

Will not recommend use CD because of low % of grow
You can contribute to SAFETY annuity with NO loss on account with Guaranteed growth and possibility full/partial withdraw, systematic withdraw

My main concern is to protect the principal and my goal is to enjoy it.

Wow! This is a ten year old thread. I am rolling some retirement funds into a Roth IRA. I hope the original poster found a Certified Financial Planner. We have one, and pay a flat fee each year. He has managed our accounts very well and has an excellent reputation.

I forget to look at the date. I look at some of these threads as discussions as well as giving advice that was asked for. Some helps people even if they are old.

As far as I am concerned ...

... what I said in Feb '03 ...

... still holds in Jan '14.

Except that ... interest rates are a lot lower now ... so rates of payout offered from an annuity will almost certainly be lower, as well.

Plus ... with all of those debts that our governments are piling up, who'll lend them more money, unless they offer a higher interest rate?

Especially since they're printing money .. which means that each dollar soon will be worth less than it was a while ago, so people who lent money to the government(s) (or any other entity, for that matter) will be worrying that they'll get paid off with dollars that aren't worth much.

ole joyful

Vesur first joined this site on Jan 22, 2014.
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Rates offered on annuities have a close relationship to interest rates offered at the time that they are set up.

As you've heard, our governments have been keeping interest rates low, the reason claimed to be to encourage our entrepreneurs to invest, to get our economy growing again.

They don't mention that they owe huge amounts of money ... and growing monthly ... so the idea of having to pay higher rates of interest on that huge and growing debt ... makes their hair stand on end (if those old mostly male legislators have much left).

But ... considering that huge and growing debt ... if they don't offer increased interest rates, aren't potential investors going to be unwilling to lend them money, fearing that they won't be able to pay off their debts?

Plus ... as they are printing money hand over fist ... won't buyers of those bonds fear that, what with so many more dollars floating around ... that they'll be paid off with dollars that won't buy much?

On our province-wide phone-in discussion group weekdays at noon for an hour on our national radio, a little over a year ago the question of the day was, "Are you better off than you were four years ago?". I don't remember how much attention was paid to the matter of four years from late '12 having been late '08, which, with early '09, was a bad time to be in the stock market.

I said that I was ... but only because I disobeyed the usual advice given to people about their investment planning.

We've been told that we should invest in equities, stocks, real estate, etc. where there's a good possibility of growth when we're young, with many years ahead to replace possible losses - a long time horizon. About 80% equities, 20% bonds at age 20.

Yeah, right: when young folks carry student debt, maybe have credit card debt, are buying a car, renting/buying a roof over their heads, getting married ... having kids.

As we age, to shift a percentage of our assets into more secure investments and fewer in the volatile ones, e.g. at 35, 65% equities, 35% bonds and other quaranteed-asset instruments: at age 50, about 50-50.

At 80, they recommend that we have 80% bonds, GICs, CDs, etc. where the amount of the principal is guaranteed not to shrink (and carries another never-mentioned guarantee ... that, apart from the rent on the money, it isn't going to grow, either). But, as each dollar's value shrinks each year, due to inflation, I must put part of the rent with the principal in order to maintain its purchasing power at the earlier level.

In Canada, interest income is taxed at top marginal rate ... with no offsetting credits.

If I buy a bond paying 2%, and am in 25% tax bracket, that reduces my after-tax retention to 1.5% ... and have you heard what the official rate of inflation is, these days? When I take that 2% official rate from the 1.5% left to me after taxes are paid ... I'm under water! Losing money.

And ... have you visited a grocery store lately? Do you agree that prince increases there, or in other areas of the economy (apart from wage rates), are limited to 2%?

At age 80+ ... I was better off at the time of the phone-in (and even more so, now) than I was 4 years previously ... and for one reason, only: I'm invested 80% in well-chosen, quality equities.

And I own a major proportion of the asset in stocks of quality corporations that I own directly, not through mutual funds, most of whom, in Canada, take on an annual basis, about a quarter to a third of average, long-term growth rates in the stock market ... and they get theirs, every year, even if there is no growth ... and they have no skin in the game (except that, if you get mad enough at their low rates of growth, about 85 - 90 percent of the time not outperforming the sector of the market in which they invest, you take your money and invest elsewhere).

ole joyful

IMHO, annuities are a good deal -- but only for the one who gets the commission for selling it to you.

I agree with randy - taking out an annuity right before retirement and buying it from a salesman with a vested interest (commissions anyone?) in the product he's hawking ... thank you, no. The banks will be glad to sell someone an annuity also - the financial folks all have a drawer full of product of the month to push in their little cubby offices. And you have to start making withdrawals at age 70 1/2. For some that's an annoyance too - another influx of money coupled with Social Security and perhaps a pension or two along with portfolio asset interest and dividends piling up in a brokerage money market account.

One could do worse than the stock market - there are umpty ump good stocks out there that pay real dividends regardless of the up and down whims of Wall St.

After 10 years, the OP has probably figured out what to do in her particular set of circumstances. But for anyone else out there contemplating sitting through an annuity selling seminar - go in with your eyes wide open.

This post was edited by duluthinbloomz4 on Mon, Jun 30, 14 at 16:12