Question:
Does deferring the maturity date of an RA assist the client in any way from a personal taxation point of view, e.g. if the RA is maturing at age 55 and the client chooses to open-end the plan to, say, age 65.
Answer:
Les,
That depends on the holder's personal situation and what he plans to do with the lump sum. If he continues to contribute to the RA and claim tax deductions, then he will most likely benefit, if not then the tax advantage diminishes. The biggest tax advantage in retirement funds is claiming tax deductions at the tax payer's marginal tax rate, but being taxed on the annuity proceeds at the average tax rate. Also, if the holder is still earning employment income at age 55 then the annuity income he receives will be taxed at a higher rate than if he only received it at retirement, and did not earn any other income then.
