TIAA-CREF 1035 exchange to Fidelity

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toptenn
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TIAA-CREF 1035 exchange to Fidelity

Post by toptenn »

I have a TIAA-CREF "Teachers Personal Annuity" (a non-qualified/after tax/variable annuity), and I am almost certain I want to do a 1035 exchange for a "Fidelity Personal Retirement Annuity." I am worried about the 1035 exchange. My cost basis for my Teachers Personal Annuity is $136,500, and I now have $585,000 in it. I am 57 years old, and I made a withdrawal of $3000 at age 49, but I can't imagine that a withdrawal 8 years ago would affect the 1035 exchange. I am kinda scared to do a partial 1035 exchange as they are held under scrutiny by the IRS. Please help me.
billfromct
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by billfromct »

I did a 1035 exchange (3-4 years ago) from the Transamerica variable annuity (old Vanguard variable annuity) & printed out the pertinent annuity value information including the “cost basis” page from Transamerica website, just in case.

Everything transferred fine including the original cost basis.

Edit: I neglected to say that the transfer was to the Fidelity Personal Retirement Annuity

bill
Last edited by billfromct on Mon Apr 01, 2024 2:12 pm, edited 1 time in total.
bikechuck
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by bikechuck »

toptenn wrote: Mon Apr 01, 2024 11:04 am I have a TIAA-CREF "Teachers Personal Annuity" (a non-qualified/after tax/variable annuity), and I am almost certain I want to do a 1035 exchange for a "Fidelity Personal Retirement Annuity." I am worried about the 1035 exchange. My cost basis for my Teachers Personal Annuity is $136,500, and I now have $585,000 in it. I am 57 years old, and I made a withdrawal of $3000 at age 49, but I can't imagine that a withdrawal 8 years ago would affect the 1035 exchange. I am kinda scared to do a partial 1035 exchange as they are held under scrutiny by the IRS. Please help me.
Can you post a bit more about your concerns re potential IRS problems with partial 1035 exchanges?

I have a similar annuity (fully liquid and paying a guaranteed minimum 4.5%) and would like to prune it back a bit to get it under my state's guaranteed insurance limits.

Thanks so much
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toptenn
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by toptenn »

Hi bikechuck, Can I ask what company provides your annuity?
crefwatch
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by crefwatch »

I am not familiar with the details of this TIAA product, and I'm inclined to think that is one of TIAA's "less-good deals". But please make sure that you are comparing apples to apples. It appears to me that Fidelity quotes the various fees separately, while TIAA may be quoting the total fees, all-in. So Fidelity prominently mentions the "Annuity Fee" of 0.25%. But it appears that there is a 0.10% Administrative Fee, and THEN, there is the regular expense ratio for the chosen investment fund. On the plus side for Fidelity, TIAA is currently waiving a huge portion of their possible Expense Charges.
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Stinky
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by Stinky »

toptenn wrote: Mon Apr 01, 2024 11:04 am I have a TIAA-CREF "Teachers Personal Annuity" (a non-qualified/after tax/variable annuity), and I am almost certain I want to do a 1035 exchange for a "Fidelity Personal Retirement Annuity." I am worried about the 1035 exchange. My cost basis for my Teachers Personal Annuity is $136,500, and I now have $585,000 in it. I am 57 years old, and I made a withdrawal of $3000 at age 49, but I can't imagine that a withdrawal 8 years ago would affect the 1035 exchange. I am kinda scared to do a partial 1035 exchange as they are held under scrutiny by the IRS. Please help me.
Why are you concerned about this exchange?

The withdrawal of $3000 eight years ago was probably fully from earnings, so you should have gotten a 1099 for $3000 at that time. The cost basis shouldn’t have been affected.

I don’t see what the problem is or could be….
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
bikechuck
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by bikechuck »

toptenn wrote: Mon Apr 01, 2024 2:02 pm Hi bikechuck, Can I ask what company provides your annuity?
It is currently held by Protective Life Insurance but they purchased it from Zurich American Life.

I purchased it back in the 1980s with $2K but began adding to it ten years ago. I probably added a bit too much but I have been enjoying the 4.5% interest payments.
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Stinky
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by Stinky »

bikechuck wrote: Tue Apr 02, 2024 5:43 pm
toptenn wrote: Mon Apr 01, 2024 2:02 pm Hi bikechuck, Can I ask what company provides your annuity?
It is currently held by Protective Life Insurance but they purchased it from Zurich American Life.

I purchased it back in the 1980s with $2K but began adding to it ten years ago. I probably added a bit too much but I have been enjoying the 4.5% interest payments.
A 4.50% guaranteed rate is definitely a relic of the 1980s….
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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toptenn
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by toptenn »

Stinky wrote: Tue Apr 02, 2024 10:44 am
toptenn wrote: Mon Apr 01, 2024 11:04 am
Why are you concerned about this exchange?

The withdrawal of $3000 eight years ago was probably fully from earnings, so you should have gotten a 1099 for $3000 at that time. The cost basis shouldn’t have been affected.

I don’t see what the problem is or could be….
Thanks Stinky, you're a lifesaver!!! I read that you normally cannot exchange an annuity once you have received an annuity payment, but I am pretty sure that refers to a guaranteed income annuity. Both my TIAA-CREF Teachers Personal Annuity and the Fidelity Personal Retirement Annuity are variable annuities, so I should be OK.
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Stinky
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by Stinky »

toptenn wrote: Wed Apr 03, 2024 1:19 pm
Stinky wrote: Tue Apr 02, 2024 10:44 am
toptenn wrote: Mon Apr 01, 2024 11:04 am
Why are you concerned about this exchange?

The withdrawal of $3000 eight years ago was probably fully from earnings, so you should have gotten a 1099 for $3000 at that time. The cost basis shouldn’t have been affected.

I don’t see what the problem is or could be….
Thanks Stinky, you're a lifesaver!!! I read that you normally cannot exchange an annuity once you have received an annuity payment, but I am pretty sure that refers to a guaranteed income annuity. Both my TIAA-CREF Teachers Personal Annuity and the Fidelity Personal Retirement Annuity are variable annuities, so I should be OK.
I think that your interpretation is correct.

When you took the partial withdrawal a few years ago, it was just that - a withdrawal.

You did not "annuitize" it. In other words, you did not elect to convert all (or a part) of your "accumulation" account into a guaranteed stream of future payments.

I expect that you'll be fine in doing your 1035 exchange.

Best to you.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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toptenn
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by toptenn »

If I did a partial 1035 exchange and moved 50% of the money to Fidelity, that would give me 2 annuities with $292,500 with a cost basis of $68,250 each. The IRS could see this as a strategy to hurry up and get down to cost basis earlier on one of them. I don't want to deal with that hassle, and I don't think I want to do a partial exchange anyway. By the way, I am not moving to Fidelity to try to make more money; I am doing it because I currently have $888,000 guaranteed by TIAA's claims paying ability, and I think that's too much.
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Stinky
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Re: TIAA-CREF 1035 exchange to Fidelity

Post by Stinky »

toptenn wrote: Thu Apr 04, 2024 9:51 am If I did a partial 1035 exchange and moved 50% of the money to Fidelity, that would give me 2 annuities with $292,500 with a cost basis of $68,250 each. The IRS could see this as a strategy to hurry up and get down to cost basis earlier on one of them. I don't want to deal with that hassle, and I don't think I want to do a partial exchange anyway. By the way, I am not moving to Fidelity to try to make more money; I am doing it because I currently have $888,000 guaranteed by TIAA's claims paying ability, and I think that's too much.
See paragraph .06 at the bottom of page 3 of the linked pdf.

https://www.irs.gov/pub/irs-drop/rp-11-38.pdf

It appears to me that if you make a partial 1035 exchange, and then don’t withdraw from the annuities for 12 months, you should be in the clear. Further, since any withdrawal up to $200,000 or more would be reported as income anyhow, you would only get into a potential tax problem if either annuity was drawn down into basis within 12 months after the partial exchange.

That being said, I am not a tax professional, lawyer, or accountant. So if you have questions or concerns, you should seek out competent advice.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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