Converting Annuities to IRA

[Guest jimheil]

Under what conditions can one transfer a variable annuity into a traditional IRA account?

I would suspect this capability is limited given their differences in annual contribution limits.

[John Olsen]

If the variable annuity is funding a qualified plan (pension, profit sharing, 401(k), etc.), that qualified plan account can be "rolled over" to an IRA [provided rollover requirements are met], funded by whatever IRA-eligible funding vehicle you wish.

If the variable annuity is non-qualified, then the only way you could "convert" this money to an IRA would be to surrender the annuity, pay the Surrender Charges (if any) AND the 72(t) 10% "early distribution" penalty [if applicable], and contribute NO MORE THAN $2,000 of the proceeds to an IRA.

You cannot "CONTRIBUTE" a Variable Annuity account to an IRA directly, even if the balance in that annuity doesn't exceed $2K. That is because contributions to non-rollover IRAs must be in CASH, not "in kind".

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John L. Olsen, CLU, ChFC

Olsen Financial Group

St. Louis, MO