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Author: fontel Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Can an annuity be rolled over into an Roth IRA? Date: 5/1/1999 9:41 AM
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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.
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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10267 of 74759
Subject: Re: Can an annuity be rolled over into an Roth I Date: 5/1/1999 10:58 AM
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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

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Author: fontel Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10291 of 74759
Subject: Re: Can an annuity be rolled over into an Roth I Date: 5/2/1999 7:58 PM
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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.


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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10292 of 74759
Subject: Re: Can an annuity be rolled over into an Roth I Date: 5/2/1999 8:27 PM
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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.html

I 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

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Author: peppermintpatty Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10298 of 74759
Subject: Re: Can an annuity be rolled over into an Roth I Date: 5/3/1999 8:18 AM
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...not the best annuity opportunity... PP!

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