Planning on moving from Annuity to IRA

[Al18]

During working years, my wife invested in a MetLife Universal (Deferred) Annuity thru a 403b plan. All contributions were pre-tax. She has been retired 1 year longer than the surrender period, so I think now is a good time to move the money to a rollover IRA with Fidelity. No money has been withdrawn from the annuity yet. I'm looking for advice for forum members who have been thru this process - any advice or comments? Should I expect the balance on the quarterly statement to transfer, or were there other fees?

[mickeyd]

You should be able to easily surrender the annuity (403b) and roll the proceeds directly from MetLife to Fido or Vanguard directly. Suggest that you contact Fido or Vanguard directly via phone, set up an account and ask them to make to request after you sign the papers. Should be a simple deal.

BTW I'm including Vanguard in my response as I think that to be the better choice for fund company.

[fosterscik]

I'd check the annuity terms offered in her original contract - she may be better off taking the annuitization. Some of these older annuities were written with old mortality tables (and not updated) which is in her favor (higher payouts) and assumed much better accrual rates (bonds were much more attractive way back when) - again in her favor.

I have an older annuity holding around $100k. It's accruing at 4.75% (guaranteed) and the payout on conversion to an annuity is more favorable than current commercial offerings. I treat this lump of cash as a bond in my asset allocation (a really nice bond) and I have no intention of transfering to an IRA unless the stock market tanks and I see a great buying opportunity.

[Al18]

All,
Thanks for the info. This is a deferred annuity, with about 45% in a 3.5% fixed rate investment and the remainder in stock mutual funds. The fees are not defined well in the plans, but based on similar holdings in a rollover IRA, they must be about 4% per year. With those high fees, I see no advantage to holding onto the annuity.

[kneehigh]

If I did the math right, I have an annuity (pretax) that pays 36% annually for 3 years or 8% annually for life. It sound good, but it forces me to take out money that I don't need and pay the tax on it. I could take it out and put it into a roth. The other option is to roll it over to a 403B and hope it gets better than 8% return and still have access to it as needed. I'm leaning towards the latter.

[REWahoo]

Quote:

Originally Posted by kneehigh If I did the math right, I have an annuity (pretax) that pays 36% annually for 3 years or 8% annually for life.

How much of that is the return of your own money?

[samclem]

Quote:

Originally Posted by kneehigh If I did the math right, I have an annuity (pretax) that pays 36% annually for 3 years or 8% annually for life. It sound good, but it forces me to take out money that I don't need and pay the tax on it.

I'd do some "what-ifs" with a spreadsheet to see what really produces the best result, and be careful not to let the tax tail wag the dog. Of course the 8% also constitutes return of principal, but if you are young that might still represent a decent return. Expected returns on equities aren't very rosy right now, and neither are expected returns on bonds/cash Also, when you do the numbers don't neglect that taxes will eventually be due, maybe at higher rates.

[kneehigh]

I contributed less than half over the years. The other half are employer contribution and interests.

[kneehigh]

This is db supplement that I didn't even know I contributed to so to me I just found 100% free money. But reanalyzing the annuity, I did put 50% of my hard earned money. If I take that out, then the return on my principal would be around 3.5% annualized for life if I want. I think I would rather roll it into my 403B (both pretax) and earn the same guaranteed return on a money market and still be able to access it as needed.

Thanks for the tip samclem.

[robertf57]

Quote:

Originally Posted by kneehigh This is db supplement that I didn't even know I contributed to so to me I just found 100% free money. But reanalyzing the annuity, I did put 50% of my hard earned money. If I take that out, then the return on my principal would be around 3.5% annualized for life if I want. I think I would rather roll it into my 403B (both pretax) and earn the same guaranteed return on a money market and still be able to access it as needed. Thanks for the tip samclem.

Not certain where you are finding 3.5% guaranteed money market returns.....