Uncover Opportunity: The Annual 1040 Review

Regularly Scheduled Reviews of Clients' Tax Returns May Help Them Manage Taxes Next Year

Scheduling an annual review of IRS Tax Form 1040 with clients may be an opportunity to confirm if their long-term retirement strategies are still on target. By taking a closer look, the form may also identify tax savings they may have missed in the past and planning opportunities for the future.

Consider asking your client these questions as you review the form:

  • Do you feel you need to grow your retirement savings faster?
  • How much guaranteed lifetime income do you think you’ll need?
  • Would you like to create a financial legacy for your loved ones?
  • Would you be interested in exploring the advantages of moving tax-inefficient strategies into tax-efficient ones?

If the answer to one or more of these questions is yes, a deferred annuity could play an important role in meeting the client’s long-term retirement strategy.


The Deferred Annuity Approach

Many people consider deferred annuities while saving for retirement because they can help:

  • Enable money to grow at a faster rate through tax deferral: Because an annuity is a tax-deferred investment for individuals, earnings will compound without current income tax. Money grows faster because clients don’t pay taxes on earnings until withdrawn or distributed. 
  • Provide guaranteed lifetime income no matter how long clients live: Annuity payout options include some that pay for life. It's an important benefit that only annuities provide. 
  • Preserve a legacy and help protect loved ones through a guaranteed death benefit: A guaranteed death benefit is a standard feature for some annuities. Many annuities may also offer enhanced death-benefit features for an additional cost. 

The following chart outlines specific topics covered on Form 1040 that you may want to consider revisiting with your client.

Topic Consideration Opportunity with a Deferred Annuity
Filing Status Do you need additional savings for retirement expenses? Tax deferral
Do you and your spouse want guaranteed income for life? Lifetime income
Do you want to provide a death benefit for your spouse? Death benefit
Dependents Do you want to provide a death benefit for your heirs? Death benefit
Business Income Do you have income from operating a business?

Lifetime income, death benefit
You can make tax-deductible contributions to a retirement plan for your business [for example, SEP-IRA, SIMPLE IRA, and/or individual 401(k)].

Investment Income Are you receiving taxable interest, dividends, and/or capital gains? Tax deferral
Are you subject to the Net Investment Income Tax (NIIT)?

Tax deferral
You may consider placing some of your less tax-efficient assets into a deferred annuity and receive tax deferral while avoiding any unnecessary taxes.

Retirement Income Are you receiving IRA distributions, pension and annuity income, and/or Social Security benefits?

Lifetime income

  • Make sure all 72(t)/(q) distributions taken before age 591/2 are compliant.
  • If you are taking required minimum distributions (RMDs), continue to take these distrubitions to avoid the 50% excise penalty. Roth IRAs do not have RMD requirements, so a Roth IRA conversion may be something to consider.
  • Roth IRA distributions can be tax-free and would not impact Social Security benefits from being subject to income tax.
Retirement-Plan Contributions Do you participate and contribute into a SEP-IRA, SIMPLE IRA, or qualified plans?

Lifetime income, death benefit
Generally, your contributions are made on a pretax basis and are a way to save for retirement and reduce your current taxable income.

IRA Contributions Are you (and/or your spouse) eligible for a deductible IRA contribution?

Lifetime income, death benefit
To make a traditional IRA contribution, you must be younger than 701/2 and have earned income. Your contributions may or may not be deductible depending on your participation in an employer-sponsored retirement plan and your modified adjusted gross income.

Adjusted Gross Income Have you considered a Roth IRA conversion so you can have access to tax-free income in the future?

Lifetime income, death benefit
Your conversion will be subject to income tax; however, future distributions will be tax-free when qualified distribution requirements are met (for example, you have owned a Roth IRA for five years and attained age 591/2).

Tax Total Would you like the potential to delay paying taxes on your retirement savings?

Tax deferral
A deferred annuity can help you grow your assets and avoid paying any unnecessary taxes.

Refund What do you intend to do with your refund? Instead of spending the refund, consider opportunities to save and invest for the future.

Under current law, a nonqualified annuity that is owned by an individual is generally entitled to tax deferral. IRAs and qualified plans—such as 401(k)s and 403(b)s—are already tax‑deferred. Therefore, a deferred annuity should be used only to fund an IRA or qualified plan to benefit from the annuity’s features other than tax deferral. These include lifetime income and death benefit options.

Guarantees, including optional benefits, are subject to the claims-paying ability and financial strength of the issuing insurance company and do not protect the value of the variable investment options, which are subject to market risk.

The above is designed to provide general information. Neither Pacific Life nor its representatives offer legal or tax advice. Clients should consult their attorneys and tax advisors as to the applicability of this information to their specific circumstances and for complete up-to-date information concerning federal and state tax law.

Tax-Management Topics


Want to Talk Further on this Topic?

The Retirement Strategies Group, subject-matter specialists with advanced degrees and designations such as CFA®, CFP®, ChFC®, CLU®, and JD, are ready to help.

(800) 722-2333
In New York, (800) 748-6907


Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney.

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. 

Variable insurance products are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA) and an affiliate of Pacific Life & Annuity Company. Variable and fixed annuity products are available through licensed third parties.

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