Roth Annuity Remedy?

[Guest fallse]

I moved a Roth account into a variable annuity. Now after 3 years, I finally got more info from my broker than prior to the move: Earnings are taxable prior to age 59 1/2, there is no return of principal, and he receives a commission for amounts withdrawn. He mentioned the surrender charges. I found this out by asking the broker to withdraw from the annuity to another Roth account. I'd like to seek recourse, but the amount may be too small.

Would you happen to know a remedy for this? A 1035 exchange, another broker or something else? Would moving from a Roth Annuity back to a regular Roth help?

I hope you may find time for this question.

[Bird]

If the annuity is titled as a Roth IRA, then you can roll to another Roth IRA without tax consequences. There will be surrender charges, but that's a contractual problem, not a tax problem. I doubt that he gets a commission on withdrawals...he got a nice commission up front, but it didn't come directly from your account; the insurance company recovers it in small doses from your contract every year. If you surrender early, then they impose a surrender charge to recover the remaining amounts already paid (roughly speaking; it's not a direct dollar-for-dollar).

If you took money from a Roth IRA and put it in a regular variable annuity...well, that's just wrong. You might think about asking the firm for damages because they allowed it to happen.

[Guest fallse]

Could you explain this further? They had me sign a document that I understood the tax consequences, maybe not the fees or GMIB though. How do I measure damages? The broker who sold it is now at anew firm and is the broker for my mother and sister. I called a couple attorneys, but they don't understand or want to seem to take on such a small amount. I guess there is FINRA or a state insurance agency.

[Bird]

I re-read your first post and it sounds like this was a rollover from one type of Roth account to another type of Roth account, a variable annuity. Your comment about earnings being taxable before 59 1/2 threw me off; that's true for any type of Roth account (plus a penalty). To be honest, the use of variable annuities within Roth accounts (or regular accounts for that matter) is quite common and generally meet the fairly low bar of being "suitable" so you probably can't do much at this point except make the best of the existing contract, or bite the bullet and surrender it and pay those costs.