From 401k to Variable Annuity to IRA

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Topic Author
woodworker7
Posts: 4
Joined: Sun Jan 02, 2022 9:11 pm

From 401k to Variable Annuity to IRA

Post by woodworker7 »

Hi everyone,

I'm a new Boglehead and this is my first post, so hopefully my questions aren't too general and there's enough information provided below.

A few years ago I was talked into rolling over my 401k from a previous employer into a variable annuity at New York Life. Unhappy with NYL, I hastily decided to rollover the funds in this annuity into a Vanguard IRA account, without considering if it was a qualified or non-qualified annuity. Now, because the annuity was a non-qualified account, the funds are sitting in a Settlement Fund within the IRA brokerage account.

For this situation, I have a few questions:
1. What are the tax implications from this move?
2. Am I able to transfer the former annuity funds to a regular brokerage account (they have received gains as they sat in the Settlement Fund) without penalty. Or, what are my other options that wouldn't result in horrible fees/headache?

Thank you in advance for reading and any help/feedback you can offer!
-D
Chardo
Posts: 1512
Joined: Fri Feb 18, 2022 12:16 pm

Re: From 401k to Variable Annuity to IRA

Post by Chardo »

How did you roll a 401k into a non-qualified annuity?
User avatar
Stinky
Posts: 14930
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: From 401k to Variable Annuity to IRA

Post by Stinky »

woodworker7 wrote: Tue Jul 09, 2024 4:11 pm Hi everyone,

I'm a new Boglehead and this is my first post, so hopefully my questions aren't too general and there's enough information provided below.

A few years ago I was talked into rolling over my 401k from a previous employer into a variable annuity at New York Life. Unhappy with NYL, I hastily decided to rollover the funds in this annuity into a Vanguard IRA account, without considering if it was a qualified or non-qualified annuity. Now, because the annuity was a non-qualified account, the funds are sitting in a Settlement Fund within the IRA brokerage account.

For this situation, I have a few questions:
1. What are the tax implications from this move?
2. Am I able to transfer the former annuity funds to a regular brokerage account (they have received gains as they sat in the Settlement Fund) without penalty. Or, what are my other options that wouldn't result in horrible fees/headache?

Thank you in advance for reading and any help/feedback you can offer!
-D
Welcome to the Forum!

Are you sure that you’ve got your facts correct? That is, was you 401(k) rolled into a non qualified annuity?

If you had done that, you should have gotten a massive increase in taxable income in the year that you purchased the annuity. That’s because all distributions from the 401k would have been treated as taxable income.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Topic Author
woodworker7
Posts: 4
Joined: Sun Jan 02, 2022 9:11 pm

Re: From 401k to Variable Annuity to IRA

Post by woodworker7 »

Ok, looks like I didn't have my facts correct and not fully understanding of the situation
I guess I misused qualified/non-qualified based on a bad memory.

In any case, the 401k was rolled over into qualified Variable Annuity held by New York Life. I transferred that annuity into my Vanguard Traditional IRA account. Those funds now sit in a Settlement Fund. Prior to the transfer I had already reached the Traditional IRA contribution limit for the year.

Since the annuity was not held in an IRA and was transferred to my Vanguard IRA, does this trigger a taxable event?
If so, am I better off transferring the funds to a regular Vanguard brokerage account and investing through it?

Thank you!
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Stinky
Posts: 14930
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: From 401k to Variable Annuity to IRA

Post by Stinky »

woodworker7 wrote: Tue Jul 09, 2024 6:27 pm Ok, looks like I didn't have my facts correct and not fully understanding of the situation

I guess I misused qualified/non-qualified based on a bad memory.

In any case, the 401k was rolled over into qualified Variable Annuity held by New York Life. I transferred that annuity into my Vanguard Traditional IRA account. Those funds now sit in a Settlement Fund. Prior to the transfer I had already reached the Traditional IRA contribution limit for the year.

Since the annuity was not held in an IRA and was transferred to my Vanguard IRA, does this trigger a taxable event?
If so, am I better off transferring the funds to a regular Vanguard brokerage account and investing through it?

Thank you!
The qualified New York Life annuity WAS held in an IRA. You can have multiple IRA accounts, and one of yours was with NYL.

Since the money moved from qualified account (401k) to qualified account (NYL annuity), and then to another qualified account (Vanguard IRA), no taxable income has been generated as of yet.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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