Benefits of Using an Annuity to Fund an IRA

[Tahoe Ray]

So if someone already has a mutual fund within a roth ira, but is unsure about the risk and wants to see other ideas (he's also very young but pours 500 a month into it), is there a way somehow to rollover the funds in his mutual funds into an annuity whether its indexed or fixed, without making it a taxable event? I know 1035 is only for likeness, wasn't sure if there were special withdrawal events etc. or other ways.
Appreciating all the great feedback!

Where's Larry at?

Yes, it is called a trustee to trustee IRA transfer...there are other ways but this is normally the cleanest. It is not called a rollover (you want to be careful using that word because it has other implications) and 1035 is specific to non-qualified life and annuities.

 

[Justin Bilyj]

Yes, it is called a trustee to trustee IRA transfer...there are other ways but this is normally the cleanest. It is not called a rollover (you want to be careful using that word because it has other implications) and 1035 is specific to non-qualified life and annuities.

Thank you for that post Ray. Can you explain more about the trustee to trustee ira transfer? Is it just another sheet, maybe application? Do you fill it out when you fill out the annuity app, before?
Thanks for the lesson on the rollover language and 1035.

 

[Norwayguy]

So if someone already has a mutual fund within a roth ira, but is unsure about the risk and wants to see other ideas (he's also very young but pours 500 a month into it), is there a way somehow to rollover the funds in his mutual funds into an annuity whether its indexed or fixed, without making it a taxable event? I know 1035 is only for likeness, wasn't sure if there were special withdrawal events etc. or other ways.
Appreciating all the great feedback!

Where's Larry at?

Qualified transfer...Fund company may or may not require signature guarantee.
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Thank you for that post Ray. Can you explain more about the trustee to trustee ira transfer? Is it just another sheet, maybe application? Do you fill it out when you fill out the annuity app, before?
Thanks for the lesson on the rollover language and 1035.

Almost every carrier will have thier own transfer form. You want the one for qualified funds transfer it will have a spot for the current custodian and contract info typically the type of qualified plan it currently is and what type it is going to.

 

[scagnt83]

To expand on and simplify what Peter said:

The Insurance Company will have a Transfer form that you can fill out.
They will send this to the other company for you, letting them know the client wishes to transfer the funds.

The company currently holding the funds may or may not accept the transfer form from the Insurance Company.
If they dont, they will want their own form filled out.

Long story short, it is usually best to just initially go to the company currently holding the funds, and ask them to send you/client their official transfer form.

This speeds up the process greatly. From my experience it takes twice to three times as long when you let the IC request the transfer. This is because they are allowed a "conservation period" to try to save the business when another company sends a transfer request. But when the client does it there is no conservation period available.

When you fill out the app with the client, go ahead then and call the current company and ask for the transfer form. Hopefully you can print it out then and have the client sign it.

Then send in your app first. Once you have an App ID# on the case. Send in the Transfer form to the current company (and be sure to reference the app#, this helps cut down on mistakes).
You will need to get bank routing info from the IC to complete the form. Just call the agent help desk and they can walk you through filling out their info on the transfer form.

The Annuity app paperwork will most likely have a transfer form in it. You can disregard this since you are using the current companies form.

 

[Norwayguy]

To expand on and simplify what Peter said:

The Insurance Company will have a Transfer form that you can fill out.
They will send this to the other company for you, letting them know the client wishes to transfer the funds.

The company currently holding the funds may or may not accept the transfer form from the Insurance Company.
If they dont, they will want their own form filled out.

Long story short, it is usually best to just initially go to the company currently holding the funds, and ask them to send you/client their official transfer form.

This speeds up the process greatly. From my experience it takes twice to three times as long when you let the IC request the transfer. This is because they are allowed a "conservation period" to try to save the business when another company sends a transfer request. But when the client does it there is no conservation period available.

When you fill out the app with the client, go ahead then and call the current company and ask for the transfer form. Hopefully you can print it out then and have the client sign it.

Then send in your app first. Once you have an App ID# on the case. Send in the Transfer form to the current company (and be sure to reference the app#, this helps cut down on mistakes).
You will need to get bank routing info from the IC to complete the form. Just call the agent help desk and they can walk you through filling out their info on the transfer form.

The Annuity app paperwork will most likely have a transfer form in it. You can disregard this since you are using the current companies form.

I disagree about using the current custodians transfer form as speeding things up. My experience with mutual funds is the fund company will send the funds fast but insurance companies can and will take up to month. I normally have my client sign a letter of instruction specifically stating the customer wishes to waive and conservation period(this part normally doesn't do anything) second that the customer is authorizing in writing for the carrier to provide status updates on the transfer to the agent and carrier recieving the funds and finally that the customer wishes to be placed on the current custodians do not call list.

 

[scagnt83]

I disagree about using the current custodians transfer form as speeding things up. My experience with mutual funds is the fund company will send the funds fast but insurance companies can and will take up to month. I normally have my client sign a letter of instruction specifically stating the customer wishes to waive and conservation period(this part normally doesn't do anything) second that the customer is authorizing in writing for the carrier to provide status updates on the transfer to the agent and carrier recieving the funds and finally that the customer wishes to be placed on the current custodians do not call list.

Admittedly, I have more experience transferring out of 401Ks than I do MFs.

The last 401k to IRA transfer I did, the funds were at the company before they even had an app# assigned to the annuity. (thats the reason I suggested to wait until an app# is assigned)

But I do agree that fund companies are quicker than insurance companies in general.


The bolded part of your quote I like and am going to steal that idea!

 

[Norwayguy]

Admittedly, I have more experience transferring out of 401Ks than I do MFs.

The last 401k to IRA transfer I did, the funds were at the company before they even had an app# assigned to the annuity. (thats the reason I suggested to wait until an app# is assigned)

But I do agree that fund companies are quicker than insurance companies in general.

The bolded part of your quote I like and am going to steal that idea!

I agree insurance companies are more difficult. Fidelity 401Ks make it so easy put the customer on the line and have the funds sent fbo the clients name right over the phone no transfer don't needed.

 

[Justin Bilyj]

Do you have a copy of that letter you give to your clients to send to their excustodian?
Thanks for the tips!