Before I became a Fool, 2 years ago, for lack of knowing better I bought a variable annuity that has grown approximately 30%. With the high fees I am paying, I feel bad about that investment decision.I am trying to get out of it without paying Oncle Sam the extra 10% early withdrawl fee. Does any of the Fools know if I can roll it over into a Roth IRA? I sincerely appreciate your educated opinion.Thanks and have a prosperous life.
fontel,My sympathies on your purchase of an annuity.You can only rollover an annuity into a Roth IRA if you are currently holding the annuity in a traditional IRA. If that's the case, you were screwed twice; once with the high fees and second time with the fact that an annuity shouldn't be held in an IRA -- it's already a tax-advantaged vehicle.If you are holding the annuity in an IRA, you could sell it, but since it's only 2 years old there are probably surrender fees. You usually have to hold an annuity for 6 or 7 years before you can switch out of it without paying surrender charges. You need to calculate the difference between the annual fees you're paying on the annuity and how much you could save on fees in an alternative investment. If the annual fees on the annuity are high enough, it might make sense to pay the surrender charge to get out of the annuity.If you are NOT holding the annuity in an IRA, you might look at a "1035 exchange." This allows you switch your annuity to a low-fee annuity provider like Vanguard without triggering any taxes. Surrender charges would still apply, so you'll need to make the calculation regarding fees outlined in the paragraph above.Fool on.intercst
Hello Intercst!Thanks for the info. No, my annuity is a regular one not in a IRA. However, I looked up the contract and realized I will have 7% surrender fee. But what boders me is that the annuity fee is 4.5% yearly up front.I'll take your advice and try to look for no load or a low load alternative. Thanks again.
fontel,There was an article in the New York Times today about an annuity offered by TIAA-CREF that has even lower fees than Vanguard. See link:http://www.nytimes.com/library/financial/sunday/050299invest-diary.htmlI you're paying 4.5% annually in fees, it probably makes sense to pay the 7% surrender charge and find a low-fee alternative.intercst
...not the best annuity opportunity... PP!
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