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Robert A. Imparato, Jr CFP®
CERTIFIED FINANCIAL PLANNER™ professional
Craig A. Hyldahl CFP®
CERTIFIED FINANCIAL PLANNER™ professional
R.I.C.H. Planning Group, LLC
105 Fieldcrest Avenue, Suite #507
Edison, NJ 08837
Robert: 732-326-5240
Craig: 732-326-5240
Fax: 732-326-5331
Robert: robert@richplanninggroup.com
Craig: craig@richplanninggroup.com
Website: www.richplanninggroup.com
July/August 2020
What's an Annuity Exchange?
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.
GE-2917467 (1/20) (Exp. 1/22)
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Securities offered through Equitable Advisors, LLC (NY,NY (212) 314-4600), member FINRA,SIPC (Equitable Financial Advisors in MI & TN). Investment advisory products and services offered through Equitable Advisors, LLC, an SEC-registered investment advisor. Annuity and insurance products offered through Equitable Network, LLC, which conducts business in California as Equitable Network Insurance Agency of California, LLC; in Utah as Equitable Network Insurance Agency of Utah, LLC; and in PR as Equitable Network of Puerto Rico, Inc. Equitable Advisors and Equitable Network are affiliated companies and do not provide tax or legal advice.
R.I.C.H. Planning Group, LLC is not owned or operated by Equitable Advisors or Equitable Network. Equitable Advisors and Equitable Network are brand names for Equitable Advisors, LLC and Equitable Network, LLC, respectively.
GE-4833845.1 (7/22)(Exp. 7/24)
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