Should my wife keep her annuity from a previous job or convert it to an IRA?
My wife just learned she has an annuity from a company she worked for over 20 years ago. She will be eligible to withdraw the funds in a couple of months. A friend told us that she should roll it over into an IRA because there would be no penalties and she could withdraw funds from the IRA also without penalties. Should she keep it as an annuity, or convert it to an IRA?
Good question. It will depend. Her former company may require her to take a lump sum or monthly payments from the annuity. They also may allow the lump sum to be rolled over to an IRA. Rolling to an IRA avoids any current taxes and allows your wife to withdraw funds at her discretion.
Keeping it in the annuity versus rolling it over to an IRA will be determined by what the former company's rules are and if she can keep it where it is what the benefits of leaving it there will be.
I would suggest you get more details from her former company before deciding what to do.
We would love to be able to help you! However, to get started on the right foot, we have many ?’s to ask you first. We work very much like a doctor would. Keep in mind you just don’t walk into the Doc’s office and immediately get a prescription.
In fact we always say that prescription without diagnosis is malpractice.
So let’s get started…..
Can she roll it over for sure? Did she retire? are you retired? Remember you dont retire in assets, but rather you retire in income.
Many more things to ask here, so give us a call
Brett M. Sause, LUTCF®, LTCP®, CLTC®, RFC®, LACP®, FSCP®
Principal & CEO
Great question, and it sounds like it was a group annuity 401(k) or 403(b) plan. Those typically have higher fees, and yes I think you're on the right path by rolling it over to an IRA account. When you mention she would be eligible to withdraw the funds in a couple of months I am guessing you mean that your wife will be 59 1/2 in a couple of months. Remember withdrawals from a pre-tax account are taxable as ordinary income, but after 59 1/2 avoids the 10% early distribution penalty. Rolling to an IRA does not create a tax liability itself, just the withdrawal of those funds to you would do that.
I hope that helps, but feel free to ask further questions.
Matt Ahrens, CIMA®