Can An Annuity Be Rolled Over Into An IRA?

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   David RacichPRO

   Fountain Hills, Arizona

   Assuming the question is referring to an existing non-qualified annuity that you desire to use in funding an IRA, the following would occur: Your name may be the same on the annuity as well as the IRA, but it reality, your changing ownership registration. If that happens your annuity, if effect, is being surrendered and that surrender will trigger an ordinary income tax event on the gain in the policy. If you’re under age 59 ½ an additional 10% penalty will be assessed as well. And don’t forget non-qualified annuity basis is tax free, by inserting it into an IRA; you give up the tax free status of basis because all IRA distributions are an ordinary income tax event. Also keep in mind that IRAs have contribution limitations, $5,500 under age 50 and $6,500 over age 50. Most non-qualified annuities are larger than that. Before moving forward with any changes consult a tax advisory or CPA.

   Answered on June 14, 2013

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