Just a few months ago, in November 2022, I decided to invest $200,000 in a MassMutual life insurance contract through Fidelity with a three-year term and a guaranteed return of 4.75% ($9,500 per year).
At the end of 2022, I received an annual statement from MassMutual saying my investment had earned $943 in the 5-6 weeks since I purchased the contract.
However, I subsequently received a 1099-R form that says I received a gross distribution of $9,422 in 2022. I had thought I would not receive any income until the three-year contract was ended (like a CD), and I do not see this large distribution reflected on my account. As a result, I supposedly owe approximately $2000 in federal income tax.
Is this correct? Is this how investments in life insurance contracts really work? Do I really owe $2000 for money I have not seen yet?
Distribution from life insurance contract
- cheese_breath
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Re: Distribution from life insurance contract
Are you sure you bought life insurance? What you're describing "(like a CD)" sounds like a MYGA (Multi Year Guaranteed Annuity). The puzzling part is MYGAs allow you to defer your taxes until you start taking withdrawals. And that's what you expected, but apparently didn't get. Did you read your contract or phone your agent?
The surest way to know the future is when it becomes the past.
Re: Distribution from life insurance contract
Thanks for your reply. I did speak to my advisor at Fidelity, and we figured out that the 1099-R form I received was for an inheritance I received last year (I was among the beneficiaries on someone’s life insurance). Although I received the inheritance through Great American Insurance Group, MassMutual must be the parent organization and therefore sent me the 1099-R. Glad that’s solved!
Re: Distribution from life insurance contract
Yes, Great American Life was purchased by Mass Mutual, and was rebranded as Mass Mutual Ascend last year. See this press release. https://www.massmutual.com/about-us/new ... May%202021.Andy67 wrote: ↑Sun Mar 19, 2023 7:43 am Just a few months ago, in November 2022, I decided to invest $200,000 in a MassMutual life insurance contract through Fidelity with a three-year term and a guaranteed return of 4.75% ($9,500 per year).
At the end of 2022, I received an annual statement from MassMutual saying my investment had earned $943 in the 5-6 weeks since I purchased the contract.
However, I subsequently received a 1099-R form that says I received a gross distribution of $9,422 in 2022. I had thought I would not receive any income until the three-year contract was ended (like a CD), and I do not see this large distribution reflected on my account. As a result, I supposedly owe approximately $2000 in federal income tax.
Is this correct? Is this how investments in life insurance contracts really work? Do I really owe $2000 for money I have not seen yet?
Separately, it sounds like you purchased a multi year guaranteed annuity (MYGA) from Mass Mutual, not a life insurance policy.
I think you’re in good shape. Post back if you have questions.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”