Annuity Question

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Jul 17, 2008 3:37 am

I have a question about VAs.  If someone has a non-qualified VA (money from savings acct), and let's say that it has already fulfilled its surrender period, can he/she move it back into a mutual fund, and withdraw it prior to 59 1/2 without incurring an IRS penalty?  Or is the rule once the non-qualified money has gone into a VA, the money is pretty much tied up by the 59 1/2 rule?

Jul 17, 2008 2:34 pm

Whether there is a surrender charge or not is irrelevant to the question.   The surrender charge has to do with the specific annuity and has nothing to do with the IRS.


If it's non-qualified money, it can always be moved from the mutual fund at any age without penalty.  The real question is whether it can be moved into the mutual fund without any penalty or more precisely, "Can it be moved out of the annuity without any IRS penalty?"
 
The answer is "maybe".  Here's a question for you, mrcl.  When can it be moved without penalty?
Jul 17, 2008 6:28 pm

Only earnings would be subject to the 10% IRS premature withdrawal penalty if taken out before age 59 1/2. If account value is less than initial investment, no IRS penalty. If there is a gain, owner can avoid penalty by electing 72(T) payments.

 
Stok
Jul 18, 2008 2:31 pm

I am working with a 45 year old client who has $300K of VA money with another advisor.  The VA money was sourced from her SAVINGS account.  I had her check with her VA company, and they told her that once the money goes into a VA, it would ALL have to stay there until she turns 59 1/2. 

The client no longer wants to be in the VA.  Can she 1035 it into a non-qualified mutual fund IRA?

Jul 18, 2008 2:35 pm
mrcl:

I am working with a 45 year old client who has $300K of VA money with another advisor.  The VA money was sourced from her SAVINGS account.  I had her check with her VA company, and they told her that once the money goes into a VA, it would ALL have to stay there until she turns 59 1/2. 

The client no longer wants to be in the VA.  Can she 1035 it into a non-qualified mutual fund IRA?

 
WHAT THE FUCK IS THAT!?!?!!?!?!?!?
 
You don't know what a 1035 exchange is.
You don't know the difference between qualified and non-qualified.
You might know what a mutual fund is.
You might know what an IRA is.
 
You need to see your manager.  You might blow this lady up in more ways than one.
 
Give me her name and phone number and I'll make sure you don't screw this up. 
Jul 18, 2008 4:26 pm

Why do you guys have to be so mean?    I'm fairly new in the industry, and am just looking for some advice.  Also, I am NOT a "him" either.

I just simply want to know where this lady can transfer her existing after tax VA money into besides into another VA.

Jul 18, 2008 4:30 pm
mrcl:

Why do you guys have to be so mean?    I'm fairly new in the industry, and am just looking for some advice.  Also, I am NOT a "him" either.

I just simply want to know where this lady can transfer her existing after tax VA money into besides into another VA.



Please post a picture of yourself.

Jul 18, 2008 4:36 pm
mrcl:

Why do you guys have to be so mean?    I'm fairly new in the industry, and am just looking for some advice.  Also, I am NOT a "him" either.

I just simply want to know where this lady can transfer her existing after tax VA money into besides into another VA.

 
So, are you an "it"?
 
Don't you have a manager that you should ask advice from? 
 
You may want to add this:  "where this lady can transfer her existing after tax and penalty VA", because after your 1035 non-qualified IRA comment, I won't even ask if you know a 72(t).
 
Just out of curiosity (and boredom on my part), how long has this client held this annuity for?  What are the total gains (or losses)?  What is the client planning on investing in or doing with this money?
Jul 18, 2008 5:20 pm

The lady has held her VA for 7 years, and it is surrender free.  Her gains are about $20K.  She still wants her money in the market, but does not want her money tied up until 59 1/2.  Is a non-qualified mutual fund an option? 

Jul 18, 2008 7:08 pm

I hate the fact that I cannot post at work.  You guys beat me to all the good replies.  Mrcl, you could just do a 1031 tax free exchange, problem solved.  Sorry about all the rude comments, you just made it too easy.

Jul 18, 2008 7:20 pm
Primo:

I hate the fact that I cannot post at work.  You guys beat me to all the good replies.  Mrcl, you could just do a 1031 tax free exchange, problem solved.  Sorry about all the rude comments, you just made it too easy.

 
1035 exchange would make more sense.
Jul 18, 2008 7:53 pm

She mentioned that she regrets having her money from her savings put into an annuity.  In a nutshell, she misses having her money liquid, but would like to park it in a place where it can have the potential to earn more than a savings account over time.  She is only 45 years old, and was introduced to the VA when she was 38.

Jul 18, 2008 7:59 pm
snaggletooth:
Just out of curiosity (and boredom on my part), how long has this client held this annuity for?
 
Obviously longer than this "FA" has been an FA.
It is scary to our profession that this conversation even takes place.  Who do you work for, and what kind of training do you get before they let you talk to prospects? 
Jul 18, 2008 8:45 pm

Along the lines of what Primo was suggesting with his 1031 idea...


Here's what you should do.  Take the NQ VA and roll it into an IRA.  Because the VA was tax deferred and the IRA is tax deferred, no tax will be due.  Once the money is in the IRA, sell the VA.  There won't be surrender charges since it is out of surrender.  Because the annuity will be in an IRA, there won't be taxes or a penalty to sell it.   After it is sold, immediately buy the mutual funds.  This must be done within 31 days.  The money can then be moved out of the IRA and no taxes will be due since there won't be any gain on the mutual funds (or very, very minimal).  There also won't be a penalty since there is no gain. 


I know that it's a round about way, but it is the only way to get the money out of the annuity without the IRS penalties.  It's worth it because not only won't there be penalties, but there won't be any tax on the gain.
 
Primo's 1031 idea would also work, but you would need a piece of property with the same approximate value as the VA.    Additionally, you would need a Series 7 license and a 67.
Jul 18, 2008 10:29 pm

uh, skippy, that was a joke.

Jul 18, 2008 10:35 pm

mrcl-

you mean well---I am sure you do--but you have perhaps set a record for the # of mistakes per sentence posted. A year or two from now, if you stay in this biz, you won't believe it yourself. Some of us ARE mean, but most just lack patience with someone in their first or second week. good luck. prospect like crazy WITH a mentor, and do not waste any more quality prospecting time here.
Jul 19, 2008 2:29 am

anon, clear out your inbox

Jul 19, 2008 6:31 am

It's clear. 

Jul 20, 2008 11:44 pm
Jul 21, 2008 11:09 am
anonymous:

Along the lines of what Primo was suggesting with his 1031 idea...


Here's what you should do.  Take the NQ VA and roll it into an IRA.  Because the VA was tax deferred and the IRA is tax deferred, no tax will be due.  Once the money is in the IRA, sell the VA.  There won't be surrender charges since it is out of surrender.  Because the annuity will be in an IRA, there won't be taxes or a penalty to sell it


You must be joking!
 
After it is sold, immediately buy the mutual funds.  This must be done within 31 days.  The money can then be moved out of the IRA and no taxes will be due since there won't be any gain on the mutual funds (or very, very minimal).  There also won't be a penalty since there is no gain. 
I know that it's a round about way, but it is the only way to get the money out of the annuity without the IRS penalties.  It's worth it because not only won't there be penalties, but there won't be any tax on the gain.
 
Primo's 1031 idea would also work, but you would need a piece of property with the same approximate value as the VA.    Additionally, you would need a Series 7 license and a 67.