Just got married wife has a annuity please help

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Willard
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Joined: Sun Apr 17, 2016 2:24 pm

Just got married wife has a annuity please help

Post by Willard » Sun Apr 17, 2016 2:52 pm

Just got married wife has a Variable Annuity

Variable Annuity has 5 years of the 7 years left before surrender charge runs out
200k was the opening balance only worth 188k
Should we pull 20 percent every year till the contract runs out ( no gains so far so dont have to pay tax or penalty)
Also should we transfer Annuity to vanguard to help keep the overall cost of that crummy annuity down

Currently invested as
Franklin Vip 50 %
Del Emerg MRKT 5 %
Fid Contrafund 5%
LVIP AM GROWTH 11%
LVIP VG INT EQ 5%
LVIP SS SC IDX 5%
LVIP VG DOM EQ 5%
LVIP SS SM 200 5%
MFS UTILITES 10%


Below are all the funds available not to many with low cost not sure what to do Please help
i provided a link for the prospectus to keep the post short
https://www.lfg.com/public/individual/e ... ancebshare

haban01
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Joined: Thu Mar 01, 2007 9:55 pm
Location: Wisconsin

Re: Just got married wife has a annuity please help

Post by haban01 » Sun Apr 17, 2016 3:09 pm

I like the idea of moving it to Vanguard to reduce internal expenses. So in theory you could reduce it by 40% to avoid fees and then move the remainder over. Too bad she got taken! :annoyed
Eric Haban | | "Stay the Course" | "Press on Regardless" | | Wisconsin Bogleheads Chapter Coordinator

Willard
Posts: 15
Joined: Sun Apr 17, 2016 2:24 pm

Re: Just got married wife has a annuity please help

Post by Willard » Sun Apr 17, 2016 3:12 pm

taken is correct those are the words i chosen with the wife not such a good idea :oops:
Any thoughts on balancing or fund changes within the annuity

Cyclesafe
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Re: Just got married wife has a annuity please help

Post by Cyclesafe » Sun Apr 17, 2016 11:18 pm

If you can take 20% out every year with no contract penalty do so. A 1035 transfer beyond this will incur contract surrender penalties, so that's a non-starter. Taxable is better with tax efficient allocations as longs as QDI's and LTCG's continue to be treated favorably tax-wise. Just be patient; this can be unwoundwith little cost. In the interim, you might consider consolidating these accounts into two or three with the lowest fees. Achieve your chosen asset allocation over your entire portfolio.

I was in your situation in the early 2000's. Slow and steady like Glucerna.

OakPhilliesFan
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Re: Just got married wife has a annuity please help

Post by OakPhilliesFan » Mon Apr 18, 2016 12:41 am

I may be wrong, but I am pretty sure that a 1035 exchange can be done free of any surrender charge. So you could first do a 1035 exchange to a Vanguard variable annuity. The cost basis of the annuity will not change, so if it's still worth less than what she paid for it at that point, you can simply surrender the new Vanguard annuity (for which there is never any fee) and invest the proceeds in a taxable account. You can report the loss on your taxes, but it isn't a capital loss. The details of how to report it seem complicated, but see this article for some information.

All of this is assuming her annuity is non-qualified (was bought with money from taxable accounts). If it's qualified (bought with money from retirement accounts), the process is in a sense easier, as you can just roll it over into an IRA with no 1035 exchange. However, I am not sure if there are typically surrender fees on qualified annuities. Perhaps there are not, in which case yours must be non-qualified.

When in doubt, call Vanguard's annuity service. They were extremely helpful in the process of getting my mother's annuities transferred over to Vanguard and they can answer all of these questions.

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Mel Lindauer
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Re: Just got married wife has a annuity please help

Post by Mel Lindauer » Mon Apr 18, 2016 1:01 am

Dave81 wrote:I may be wrong, but I am pretty sure that a 1035 exchange can be done free of any surrender charge. So you could first do a 1035 exchange to a Vanguard variable annuity. The cost basis of the annuity will not change, so if it's still worth less than what she paid for it at that point, you can simply surrender the new Vanguard annuity (for which there is never any fee) and invest the proceeds in a taxable account. You can report the loss on your taxes, but it isn't a capital loss. The details of how to report it seem complicated, but see this article for some information.

All of this is assuming her annuity is non-qualified (was bought with money from taxable accounts). If it's qualified (bought with money from retirement accounts), the process is in a sense easier, as you can just roll it over into an IRA with no 1035 exchange. However, I am not sure if there are typically surrender fees on qualified annuities. Perhaps there are not, in which case yours must be non-qualified.

When in doubt, call Vanguard's annuity service. They were extremely helpful in the process of getting my mother's annuities transferred over to Vanguard and they can answer all of these questions.
While you can do a 1035 exchange TAX-FREE, surrender charges can still come into play if she's still in the surrender period, which it sounds like she is.
Best Regards - Mel | | Semper Fi

OakPhilliesFan
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Re: Just got married wife has a annuity please help

Post by OakPhilliesFan » Mon Apr 18, 2016 1:05 am

Mel Lindauer wrote:While you can do a 1035 exchange TAX-FREE, surrender charges can still come into play if she's still in the surrender period, which it sounds like she is.
Thanks for the correction. I must have misread the page I was reading on 1035 exchanges. My mother's non-qualified annuity was out of the surrender period, so I never had to deal with that.

gd
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Re: Just got married wife has a annuity please help

Post by gd » Mon Apr 18, 2016 5:54 am

No clue if there's overhead in this, but if not and it's going to stay there for a while I'd consolidate everything into the broadest index they've got. This seems like a fund selection based on the time-honored principle of "make the portfolio hard to understand and look really sophisticated".

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