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No, unless the annuity is in an employer's plan, and even then it would be treated as a taxable conversion. I assume your client's annuity is one he purchased himself, and if that's true, he can not roll it into a Roth IRA. Funds can only get into a Roth IRA via annual contributions, based on W-2 or S-E income, or via conversions from traditional IRAs. -
My first question would be if this so called tax free annuity had been grandfathered in at some time since during the many many tax code changes. IOW, does it still enjoy tax free status?
Probably yes, otherwise the custodian/trustee, whomever would have changed reporting requirements if there had been a change. Still.....
Why change to a ROTH at this late stage IF results are still tax free? Would broker obtain a commission on the transaction?Leave a comment:
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Tax Free Annuity Question
For any of you who may remember the "old" days before the mid 1970s:
There was no such thing as an IRA. Or a 401k. Or a 403b.
If someone wanted to save for retirement, the ideal investment was a "tax-free" annuity. Sold by insurance companies, these things
would earn interest, and as long as the investor never touched the account, the earnings were tax free. The concept of a "deferred retirement"
account with RMDs, penalties, exceptions, etc. as we know today had not yet been created. But if you wanted to save for retirement, this
was the way to do it.
One of my older clients has such an investment. His broker wants to take this tax-free annuity and roll it over into a Roth.
Can he do that?
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