Hi Terry,

When my mother turns 90 next year her variable annuity IRA will annuitize. We would like to perform an IRA rollover prior to this occurring. She depends on her IRA distributions and social security for her monthly income and other than her house and a savings account (~$50K) she doesn’t have other substantial assets. Her IRA will be worth about $500K after she takes her 2016 required distribution. Where would you recommend she rollover her account to (a firm like Vanguard, Fidelity, Schwab or a bank) and how should she invest for safety (money market, bank CD, short term laddered high quality bonds)? Looking for a company that has low fees and offers some basic financial planning services. Also given the amount is over the FDIC limit I’m not sure rolling over to a bank is prudent. Mom is healthy and we hope she is with us another 5+ years. Would really appreciate your advise. Thanks.

Terry Says:  First check the restrictions on rolling over the annuity at this stage.  If the annuity isn’t written to last her lifetime and that of her beneficiary, you certainly want to move it before it gets to the point of annuitizing.  Remember, even if she doesn’t use much of the principal of the account over the next few years except for RMDs , her heirs will get the benefit of stretching out the balance that they inherit.  But it’s likely this won’t be possible once this contract annuitizes.

That’s a HUGE IRA balance in an account that has been taking required minimum distributions.  Actually RMDs are designed for her to have very little left at her age!  So the large balance is somewhat surprising.   And,  who on earth sold that annuity to her anyway, and how long ago??  The IRA was already tax-sheltered and she wasn’t going to need an income stream?!!

For specific advice on this contract and what can be done now,  DONT contact the salesman who put her into this.  Instead feel free to reach out to my annuity expert — Jeffrey Oster at 888-655-1035 or Jeffrey.Oster@RaymondJames.com.  I trust him completely.  He will be able to look into the specifics of the contract and into your options.

Then you can, if allowed, do a rollover to Fidelity or Vanguard.  Think about this:  It’s very unlikely that she will need all this money in her lifetime.  So while you might want to keep some cash and liquidity in a money market mutual fund, you can also invest the balance for long-term growth — so it can grow for her heirs.  And make sure she/you name the beneficiaries correctly, so that at her passing it will pass into the intended hands of her heirs. Then instruct the beneficiaries not to take the remaining cash, but to roll it into their own IRA — where it can continue to grow tax-deferred!

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