Should I Keep My Variable Annuity?
Have you ever asked yourself, “Should I keep my variable annuity?”
If so, the answer may not be as easy as you think.
To download your FREE ebook “How To Avoid Annuity Traps” visit http://retirementplanningmadeeasy.com/annuity-traps
There are 4 important questions to ask when determining if you should keep your variable annuity or not.
1. What is it about your variable annuity you don’t like? Is it the fees, the market risk exposure, the benefits you may not need like an income rider? Or is it something else entirely?
2. How much tax deferred growth is in your variable annuity? As long as your growth remains inside the variable annuity it won’t be taxed. But when you pull the funds out they will be taxed. How much of your variable annuity is comprised of earnings that have never been taxed?
3. How much would you get taxed if you pulled your money out of your variable annuity? This questions is similar to question #2. But the difference is, what marginal tax bracket would you fall in if you pulled funds out of your variable annuity? Would it push you into a higher tax bracket?
4. What do you want to do with the funds? Make sure you know what you want to do with your funds before surrendering. If it was the market risk exposure you didn’t like on the variable annuity, then you probably don’t want to get a mutual fund. If it was the high fees you didn’t like, then you probably don’t want to get another high fee product.
After you have answered these 4 questions you are in a better position to make a decision. You will generally have 3 options on what to do with your variable annuity.
Option 1: Pull your money out of your variable annuity with a full withdrawal. If you do this, understand the tax consequences and surrender charge consequences.
Option 2: Keep the variable annuity and allocate your funds to the fixed rate account. Many variable annuities will give you the option to allocate your funds into a fixed rate account. If you don’t want the market risk exposure this is a way to get rid of it. However, be aware of any fees you may continue to pay. They will put a drag on your stated fixed rate.
Option 3: Roll your variable annuity into another annuity. If you do a 1035 exchange you can keep the tax deferred growth of your variable annuity from being taxed yet. In other words you can keep the tax deferral going a bit longer.
You can roll into a fixed annuity or another variable annuity. It depends on what you are looking to do with the funds.
For more information, please download my FREE ebook “How To Avoid Annuity Traps” at http://retirementplanningmadeeasy.com/annuity-traps
Also, if you have questions you’d like to ask me directly, then you can claim a spot on my calendar for a 20 minute phone conversation by visiting: http://www.meetme.so/chrishammond
I’ll help you answer your questions and point you in the right direction.