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Tom Meaglia, ChFC®, AEP®,

CLU®, CRPC®, MSFS

Chartered Financial Consultant

Investment Advisor Representative

Chartered Retirement Planning Counselor

CA Insurance Lic. #0567507

 

Meaglia Financial Consulting

2105 Foothill Blvd., #B140, La Verne, CA 91750

 

Toll Free: 800-386-3700

Bus:         909-593-6105

Cell:         818-681-8600

Fax:         909-593-6120

 

Email: tom@meagliafinancialconsulting.com

Website: www.meagliafinancialconsulting.com

July/August 2020

What's an Annuity Exchange?

A couple sitting on couch reviewing documents with an advisor.

When you surrender an annuity or cash value life insurance policy, you may face taxes and penalties unless you exchange it in a tax-approved way. That way is a 1035 Exchange, named after a section of the Internal Revenue Code. If you are considering such an exchange, understand the consequences first before making any decision.


Why Exchange?
Why would you want to exchange an annuity?* You may prefer to buy one from a financially stronger company, an important point because annuities are not FDIC-insured. Or you may find one that has a higher initial interest rate.


You could, however, run up against a few obstacles trying to make an exchange. One, you will be older and your premiums could be higher because of it. Two, you could pay more or even be denied coverage because of an adverse change in health. Three, it takes more time to make a 1035 exchange than simply surrendering the policy, but the tax savings may make it worth your while.


1035 Benefits
This section of the tax code allows you to move earned interest from one annuity to another without incurring taxes or early withdrawal penalties. You’ll still need to check with your annuity issuer to see if surrender charges, which can be significant, come into play.


If surrender charges are an issue, you may be able to make a partial exchange that’s surrender-fee-free. If you exchange policies issued by the same insurer, you may not have to deal with surrender charges. Talk to an insurance professional to learn more.


*An annuity may impose charges, including but not limited to surrender charges, mortality and expense risk charges, administrative fees, underlying fund expenses, and feature charges that can reduce the value of your account and the return on your investment. You will have to pay federal income tax on any earnings you withdraw from the annuity during retirement or before. Payments and guarantees are subject to the claims-paying ability of the issuing insurance company and the underlying investment options are subject to market risk and may lose value.


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Thomas Meaglia is an Investment Adviser Representative of Coppell Advisory Solutions LLC, dba, Fusion Capital Management, a registered investment adviser that only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting.
Insurance and annuity products are not sold through Fusion Capital Management. Fusion does not endorse any annuity or insurance product, nor does it guarantee any insurance or annuity performance. Annuity and life insurance guarantees are subject to the claims-paying ability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain time after investing, the insurance company may assess a surrender charge. Withdrawals may be subject to tax penalties and income taxes. Persons selling annuities and other insurance products receive compensation for these transactions. These commissions are separate and distinct from Fusion's investment advisory fees.
Meaglia Financial Consulting and LTM Marketing Specialists LLC are unrelated companies. This publication was prepared for the publication’s provider by LTM Client Marketing, an unrelated third party. Articles are not written or produced by the named representative.

The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.