What Can I Roll a Variable Annuity Into?
Insurance companies design and sell annuities to guarantee an income to you during retirement. Annuities are essentially long-term savings contracts. One type of annuity is a variable annuity. If you don't like how your annuity is performing, you can roll your variable annuity into another annuity. Make sure you understand how this process works before doing it, however.
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Process
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The process of rolling your variable annuity into another annuity requires that you fill out a 1035 exchange form. This exchange form directs your existing insurance company to transfer the money in your annuity to another annuity. The annuity may be held with the same insurer or a different one. The exchange normally takes 30 to 45 days if the money is being transferred to another insurance company and may take less time if the money is staying with the same insurer.
Significance
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The significance of rolling your money into a new annuity is that you can eliminate the investment risk of your variable annuity if you choose a new annuity that pays a fixed rate of interest. Additionally, you are exchanging your annuity for a new annuity, which may contain new terms and conditions. Your new annuity may also allow you to earn higher potential interest rates than what is available from your current annuity if the new annuity contains new mutual funds, other investments or a new way to credit interest to the annuity account.
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Benefits
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The benefit of rolling your annuity into a new annuity is that you may be able to take advantage of stronger annuity guarantees or new terms and conditions. For example, your old annuity may not offer certain provisions like a locked in death benefit guarantee. Your new annuity may offer you the option of a death benefit which will never decrease. Normally, annuity death benefits are the same as your current account balance. With a variable annuity, this death benefit fluctuates with your account balance. With a guaranteed minimum death benefit, your death benefit amount only increases with your account balance, and any losses in your annuity account are ignored for death benefit purposes.
Warning
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Before rolling over your variable annuity, make sure you understand the surrender charges on your annuity. Surrender charges are penalties assessed by the insurance company for liquidating or rolling your annuity over to a new annuity account before the date specified in the contract. This date is known as the maturity date of the contract.
Considerations
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If your contract hasn't matured yet, consider waiting until it has. Also, think about why you are moving your annuity. If you can keep your existing annuity, consider doing so. New annuities come with new surrender charges and a new maturity date.
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