Ask Terry Questions Variable Annuity conversion to Roth?

Variable Annuity conversion to Roth?

By Terry Savage on April 28, 2018 | Insurance & Annuities

Hi Terry, I currently have a variable annuity. The sub-account's value is about $670,000. I have about five and a half years before I will turn on the income stream. At that time the step-up value will be $1,000,000. I'm contemplating converting this to a Roth. I'm estimating that the tax hit will be about $225,000. I have the cash to pay the taxes. I'm getting conflicting advise on weather I should go through with this conversion. I will have other income and don't plan on collecting social security until I'm 70. I'm currently 56. Any guidance from you is will be greatly appreciated! Thank you!

Terry Says

I can't imagine WHY you would even consider this!  You have a growing income base, tax deferral, and you can take out as much as you want at any time -- or wait and turn on the income stream (which is different than "annuitizing" you know).   Why would you pay taxes now on a Roth conversion?  Instead your withdrawals can be taxed as taken.  And meanwhile your promised income base is likely to keep growing based on a guaranteed base interest rate.  And if you're worried about your investments, switch to the most conservative option inside the variable annuity.



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