How to Change an IRA to an Annuity

An IRA (Individual Retirement Agreement) is a tax-deferred account that allows investors to save for retirement. An annuity is a type of insurance investment that functions very similarly to an IRA, with money growing tax deferred and accessible without penalty at age 59 ½. There are two ways to change an IRA into an annuity: (1) an IRA transfer or (2) liquidation and reinvestment in a IRA rollover annuity.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• IRA statement
• Annuity new account form
• Distribution form (old IRA)
• Transfer form (from new annuity company)

How to Transfer an IRA to an Annuity

1. Meet with the annuity representative and fill out new annuity paperwork. Be sure your name is the same as it is on the IRA paperwork and the contact information is the same; otherwise, this can cause a delay or denial of the transfer.

2. Fill out the "IRA transfer" form from the annuity company to which the IRA is being transferred. Include the amount to be transferred. This may fluctuate, but should be the most recent value known, either shown on the statement or confirmed by calling the trustee holding the IRA.

3. Copy the IRA statement and include it with the application and transfer form.

4. Wait 60 days and follow up. Trustees don't always release the funds in a timely manner. This is not an issue that will create any tax liabilities, but is a concern if you are moving the money because of poor investment performance. In any case, you will generally want to make sure everything is moving quickly.

5. Follow up with the new annuity IRA company when funds have been sent to ensure the transfer occurs timely and the investment is made expeditiously.

How Roll Over an IRA to an Annuity

6. Contact your IRA trustee and request a distribution form.

7. Fill out the form accurately with your name, address and account information.

8. Check the box to have no taxes withheld. (Regular distributions are taxable events and can amount to considerable taxes and penalties. Make sure the entire amount in the IRA is sent for rollover.)

9. Sign the form and send it to the IRA trustee.

10. Fill out the new annuity "new account" paperwork, including your name, contact information and investment options. Make sure the paperwork has the box "IRA Rollover" checked. Otherwise, this is not a rollover, and you will be taxed for the IRA distribution and reinvesting in a new tax-deferred vehicle that will later tax you again when you take distributions.

11. Deposit the check (when it arrives from the IRA trustee) into the annuity or with the annuity new account paperwork. This needs to be completed within 60 days of the original IRA account being closed.

Tips & Warnings

• Note: The term IRA is often referred to as an "Individual Retirement Account" or "Individual Retirement Annuity." These are both correct terms that describe a type of Individual Retirement Agreement, as recognized by the IRS.

References

• IRS.gov: IRA Rollovers
• Penn Mutual: Transfers and Rollovers Between IRAs