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No. of Recommendations: 13
The uncertainty of all this is exactly why financial aid would be the icing on the cake and not the primary reason for getting an annuity. We already have the cash set aside for their school, and in fact it would be part of what we would use to buy the annuity.

If you used the cash you have set aside to buy the annuity, where would their college funds come from? If you have to then sell stock to pay their tuition, you'd still have a capital gains tax hit, and you may be selling stock at an inopportune time.

When we looked at some of those annuity programs that are touted to help the kids get more financial aid, one of the conditions on the annuity was that your money was locked up for 10 years. Not sure if that is still the case since it has been a few years, but that is something you'd want to ask.

Also, I had a fundamental problem with giving my money to an insurance company in the hopes that they would still be financially solvent when it came time for me to start taking distributions, and I couldn't stand losing the control on that money in case I needed it for anything else. That was essentially a non-starter for me right there.

But either way, we are looking to reduce our exposure to TIRAs and their resulting RMDs at 70. If we had been smarter about this we would not have put so much into retirement funds, but being compulsive savers we just did.

I admit that I'm not understanding the issue here. You took a tax deduction when you contributed that money into those tax-deferred accounts, so you always knew that the money would have taxes owed on it once you started taking distributions. As with most people, I'm guessing that you were hoping to be in a lesser tax bracket, but even if you are in the same tax bracket, you end up in the same place tax-wise.

We've worked with a financial planner, and based on his projections and our estimates of expenses, (pretty darned low as we are very low maintenance people without debt,) our principal will triple by the time we die, leaving our kids way wealthier than they should be. I've confirmed this with my own spreadsheets and financial calculator runs.

Given that your numbers are working out that you will have plenty to spend during your lifetime and still leave a big pile to your kids, I do think you are overthinking this. Perhaps if you just think about it as paying the taxes now that you did not pay earlier instead of perhaps thinking of it as paying more taxes than you should, it would relieve some of the stress of the situation, and you could more go with the flow.

You should be congratulated on saving so well, and this really is a good problem to have. Take the time to enjoy the fruits of your labor now that you can.
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