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Will an annuity carrier accept an Inherited IRA transfer from a brokerage account?

Apr 10, 2014 by Anthony from Bothell, WA in  |  Flag
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5 votes

Anthony, I agree with both comments made by the other two advisers regarding the insurance companies accepting these funds and etc. My bigger picture question to you is why would you transfer your inherited IRA from the brokerage platform? Your Inherited IRA is already a tax deferred vehicle and a Tax Deferred Annuity IRA will be less flexible and you will probably pay higher annual fees for the tax deferred feature you already have. right now!!

When you get dressed in the morning, do you put a belt on your pants and then put on a pair of suspenders too? The annuity products pay a nice commission to the agent and are "sold" to investors like you! I recommend you first talk with a fee based independent adviser before you increase your costs, get no additional real benefits while losing flexibility of future investment options. Please take your time here!!

Thanks for asking the question before you proceeded.

View all 4 Comments   |  Flag   |  Apr 10, 2014 from Milwaukee, WI
Rich Winer

I understand his recommendation. Issues to consider are how long your money will be tied up in the annuity and subject to steep surrender fees, your age, return objectives, risk tolerance, and how he is managing the more aggressive part of your portfolio. Perhaps your entire portfolio should be managed in a more balanced, moderate approach without having to tie up your money in an annuity. If you would like to discuss other options before you tie up your money in an annuity, feel free to contact me privately.

Flag |  Apr 10, 2014 near Woodland Hills, CA
Larry McClanahan, CFP®, ChFC, CLU, CASL

Two additional thoughts . . . .

It's likely the insurance company will require sign-off on the exact same payout/distribution arrangements for the Beneficiary IRA as are currently set-up at the brokerage account. For example, if distributions are currently set-up to stretch over the beneficiary's life expectancy, it's likely the insurance company will require written commitment to the same set-up.

The other $100,000 going into a managed portfolio of about 50 individual stocks...you're kidding right? At the $100,000 level and a "moderately aggressive" profile, there's little reason to have 50 moving pieces and all the transaction charges that entails. A roughly equivalent portfolio could easily be constructed with 5 or 6 exchange-traded funds.

Flag |  Apr 10, 2014 near Clackamas, OR

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3 votes
Rich Winer Level 20

I am not a big annuity fan, but you will have to check with specific insurance company whose annuity you are considering. Make sure they will do a trustee to trustee transfer. If you are inheriting an IRA from anyone other than a spouse, you can not roll over the funds to an IRA in your name. It would have to be done as a trustee to trustee transfer. If you try to initiate a non-spouse inherited IRA rollover, you will end up liquidating the IRA. Be careful.

Comment   |  Flag   |  Apr 10, 2014 from Woodland Hills, CA

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Yes, Anthony the insurance company will accept a direct transfer from a brokerage account. You will have to move the IRA into cash, which will not be a taxable event since the account is tax deferred and then the cash is sent to the insurance company. You will then have to take RMD's out each year. The main reason for an annuity is protection from living too long and for that reason an annuity makes sense inside or outside of an IRA.

Comment   |  Flag   |  Apr 10, 2014 from Medina, OH

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Anthony, I agree with most of the other advisers here on the need for an annuity; when it comes to an IRA, they're kind of like putting training wheels on a sports car... they're unnecessary and they sure do slow you down! In addition, an account worth $100,000 that is invested in only 50 different stocks can not be properly diversified (when you look at company risk and asset diversification; mutual funds work better for this size account). Also, If there are no bonds or fixed income in this $100k, then it is not moderately aggressive. (it may be moderately aggressive if you are including the annuity, but since that would likely have a long surrender period it loses on the liquidity side). Also, a properly diversified portfolio of moderate risk that stayed fully invested through the market downturn of 2007-2009 should have recovered most if not all of its losses long ago. My point is that a properly constructed portfolio for a moderate risk tolerance would mitigate a lot of the downside you are concerned about; whereas those fixed annuities have a lot of caps and participation rates that in the long term make them perform little better than a bank CD.

Comment   |  Flag   |  Apr 10, 2014 from Malvern, PA

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-3 votes

That depends on the carrier and there are a few more stipulations as well. Some annuity carriers will not accept Inherited IRA funds. Others may accept so long as the decedent was age 75 or less at time of death and the new owner of the inherited IRA will receive distributions based his or her attained age per the IRS single life tables. You must check the individual carrier requirements of work with an independent agent who knows the carriers that will accept.

View all 4 Comments   |  Flag   |  Apr 10, 2014 from Bothell, WA
Rich Winer

Yes, I'm wondering as well.

Flag |  Apr 10, 2014 near Woodland Hills, CA
Rich Winer

Anthony, Why are you asking and answering questions as both advisor and client? Why did you ask the same question in another post and then immediately answer it? This forum is for consumers to ask questions of financial advisors. If you are an advisor and want to demonstrate your expertise, you should do so by posting an article.

Flag |  Apr 11, 2014 near Woodland Hills, CA

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