Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Fixed Annuity Question
Old 01-14-2007, 10:29 PM   #1
Recycles dryer sheets
 
Join Date: Nov 2006
Posts: 105
Send a message via Yahoo to OkieTexan
Fixed Annuity Question

Does anyone have a good source of information about fixed annuities? Here is the deal:

I purchased a non-qualified fixed annuity in 1993. It has passed through three companies and numerous agents over the years. I am not sure why I bought the thing. It must have been a weal moment! Rather than saying I coulda... I woulda... or I shoulda, I am thinking of withdrawing all my funds and putting the money in a better spot. The interest rate has hit the bottom at 3%. I am also aware that withdrawing the funds will create a taxable event. I bought it for $25,000 in 1993. It is worth $47,000 now.

The form I received to withdraw the funds has a provision to allow the insurance company to withhold income tax. Is this a good idea? How much? Is is possible to roll one of these into an IRA? What is a 1035? How does it work?

Any suggestions on how to get credible information?
__________________

__________________
OkieTexan
OkieTexan is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Fixed Annuity Question
Old 01-14-2007, 11:21 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Dallas 'burb
Posts: 9,039
Re: Fixed Annuity Question

My husband recently moved his annuity from one insurance co to Fidelity. The reason he did this was because of the fees. If he had cashed the annuity out, he would have to pay ordinary income taxes plus a 10% penalty since he is only 52.

Since we went with Fidelity, they filled in most of the information on the form, we looked it over, signed it, and sent it back. The 1035 exchange information was included on the form. This form is used so that you will not have to pay taxes since you are simply placing it with another company. The Fidelity website has a lot of information regarding annuities and any other type of investment.

I know I couldn't answer all of your questions, but I hope this helps.
__________________

__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
Re: Fixed Annuity Question
Old 01-15-2007, 10:42 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Re: Fixed Annuity Question

Quote:
Originally Posted by OkieTexan
Does anyone have a good source of information about fixed annuities? Here is the deal:

I purchased a non-qualified fixed annuity in 1993. It has passed through three companies and numerous agents over the years. I am not sure why I bought the thing. It must have been a weal moment! Rather than saying I coulda... I woulda... or I shoulda, I am thinking of withdrawing all my funds and putting the money in a better spot. The interest rate has hit the bottom at 3%. I am also aware that withdrawing the funds will create a taxable event. I bought it for $25,000 in 1993. It is worth $47,000 now.

The form I received to withdraw the funds has a provision to allow the insurance company to withhold income tax. Is this a good idea? How much? Is is possible to roll one of these into an IRA? What is a 1035? How does it work?

Any suggestions on how to get credible information?
You would owe ordinary income tax rates on any withdrawals fromt he annuity. You could 1035 (transfer) the annuity from the carrier you have to another without a penalty, it's a pretty simple form you sign.

Try www.annuity.com

__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Re: Fixed Annuity Question
Old 01-15-2007, 11:18 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W
Posts: 5,884
Re: Fixed Annuity Question

I would look at doing a 1035 exchange from your current company to Vanguard. Before you do make sure that all surrender changes have expired. I have seen annuities that retain a surrender charge as long as 15 years ( ) but they are rare.

Why take the tax hit on the lump sum distribution if you do not have to? As long as you do not need the money to live on, I would keep it with Vanguard until you are at least 59 1/2 years old and actually can use the income and avoid the 10% penalty.
__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is offline   Reply With Quote
Re: Fixed Annuity Question
Old 01-15-2007, 01:06 PM   #5
Recycles dryer sheets
 
Join Date: Nov 2006
Posts: 105
Send a message via Yahoo to OkieTexan
Re: Fixed Annuity Question

Thanks for the tips. Annuity.com explains pretty well the differences between the types of annuities and how they work. Wikipedia is pretty good, too.

I suppose the 1035 process is confined to transferring from one annuity provider to another. Still not sure if that is the right answer for me. Still checking options.
I really don't need the key feature of an annuity: "guaranteed income payments".
Also, when the "teaser rate" expires, I would still have to seek a higher rate. Every time you move one of these things the annuity date changes. The one I have is already up to 2042 (age 90 for me). So, the only real advantage would be tax-deferred savings.

It just bugs me to leave money in a 3% account........ tax-deferred or not!
__________________
OkieTexan
OkieTexan is offline   Reply With Quote
Re: Fixed Annuity Question
Old 01-15-2007, 01:12 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: Fixed Annuity Question

Quote:
Originally Posted by OkieTexan
Thanks for the tips. Annuity.com explains pretty well the differences between the types of annuities and how they work. Wikipedia is pretty good, too.

I suppose the 1035 process is confined to transferring from one annuity provider to another. Still not sure if that is the right answer for me. Still checking options.
I really don't need the key feature of an annuity: "guaranteed income payments".
Also, when the "teaser rate" expires, I would still have to seek a higher rate. Every time you move one of these things the annuity date changes. The one I have is already up to 2042 (age 90 for me). So, the only real advantage would be tax-deferred savings.

It just bugs me to leave money in a 3% account........ tax-deferred or not!
Bear in mind that you needn't bother with the whole stream of payments mishmash (almost nobody does, in fact). What you realy want is to just reinvest the money in something better and leave it in the annuity "shell" to avoid paying the taxes. Vanguard, TIAA-CREF and Fidelity will all happily do this for you. What you want is a variable annuity with no supplemental guarantees. This is basically a mutual fund with deferred tax treatment and pretty low expense ratios, and the underlying investment can be almost anything you want it to be (small caps, S&P 500, bond fund, REITs, etc.).
__________________

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Annuity Horror Story...Again mickeyd FIRE and Money 6 09-28-2006 09:57 AM
Variable Annuity Help 2B Life after FIRE 0 05-13-2006 03:46 PM
Annuity question (what to do, what to do...) cj FIRE and Money 9 09-19-2005 07:38 AM
Question for Ted on Long Term Fixed Income Holding Cut-Throat FIRE and Money 19 01-14-2004 07:54 AM
Question - 'Chicken' Money' Ol_Rancher FIRE and Money 1 01-10-2004 08:56 AM

 

 
All times are GMT -6. The time now is 03:58 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.