This tax year,will you be paying capital gains tax created by turnover in your mutual fund portfolio? Even if you didn’t make money this year, you may still have to pay taxes on any gains your mutual fund made each time it sold existing holdings to combat market volatility. For example:
2000
You invested in Mutual Fund A.
2001
Mutual Fund A purchased XYZ Company shares at $20 per share. At its highest point in 2001, XYZ Company’s shares were $75 a share.
2002
Disappointed with the company’s prospects, the fund sold shares of XYZ Company at $35 a share.
Though you didn’t change anything about your portfolio, your mutual fund sold shares within the fund and triggered a capital gain. You receive a 1099 form and owe capital gains tax on the $15 per share gain.
How can you avoid this possibility in the future?
By investing long-term in a variable annuity, you defer paying taxes until you take withdrawals or other distributions, surrender the annuity contract, or begin taking income payouts.Talk to your financial professional today about how a variable
annuity can help you meet your retirement needs and financial objectives in a tax-efficient way.
Ask your registered representative or call Pacific Life at (800) 722-2333 for prospectuses with more complete information about Pacific Life variable annuities, including charges, limitations and expenses. Read them carefully before investing or sending money. Variable annuities are long-term investments designed for retirement.Withdrawals and other distributions of taxable amounts will be subject to ordinary income tax, and if taken prior to age 591/2, a 10% federal tax penalty may apply. A withdrawal charge may also apply. Past performance does not guarantee future results, and current performance may be lower or higher than the performance quoted. Pacific Life Insurance Company is licensed to solicit individual life insurance and annuity products in all states except New York. Product availability and features may vary by state.
Contracts owned by entities, such as corporations, partnerships and certain trusts, are not eligible for tax deferral. Pacific Life does not provide administration services for qualified plans and does not act in a fiduciary capacity. Neither Pacific Life nor its representatives give tax or legal advice. Clients should consult their tax adviser and attorney regarding their specific situation.The federal and state income tax laws regarding variable annuities are complex and subject to change. Representations made herein are neither complete nor necessarily up-to-date.
It’s important to know that qualified plans such as 401(k)s, as well as IRAs, are already tax-deferred.Therefore, an annuity contract should be used to fund an IRA or qualified plan to benefit from the annuity’s features other than tax deferral.The other benefits of using a variable annuity to fund a qualified plan or an IRA include the lifetime income options, guaranteed death benefit options and the ability to transfer among investment options without sales or withdrawal charges. Variable annuities issued by Pacific Life Insurance Company are distributed by Pacific Select Distributors, Inc. (member FINRA & SIPC), a subsidiary of Pacific Life, and are available through licensed third party broker/dealers.
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