Can Annuities Be Rolled Over Into An IRA?

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   David RacichPRO

   Fountain Hills, Arizona

   If you’re addressing existing non-qualified annuity and you desire to use in funding an IRA, the following cautions are advised. 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 adviser or CPA.
    

   Answered on June 15, 2013

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