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Aug 25, 2017 by |

California Annuity Attorney: Annuities in IRAs


Be Wary of Annuities in IRA Accounts

IRAs Are Tax-Deferred

Tax deferral is the key to successful retirement savings. IRAs, 401(k)s, SEPs and the like offer deferral and savers can see their retirement savings grow tax-free until it’s time to withdraw without penalty after age 59 ½. Annuity salesmen often counsel consumers to invest IRAs in deferred annuities. We at Evans Law Firm have years of experience with variable annuities and, while each situation is different and we do not give legal advice in this column or anywhere on our website, we do recommend a close look at annuities in IRA. If you or a loved one have been sold an unsuitable annuity, call the experienced financial elder abuse and annuities lawyers today at Evans Law Firm, Inc. (415)441-8669 and we may be able to help. We accept annuity cases in the State of California

Let’s back up. Understand first that the IRS allows you to grow your IRA contributions tax-deferred even if the contributions are invested in stocks, bonds, and money market accounts that otherwise would be subject to immediate taxation if held in your own account outright. Deferred annuities are similarly tax-deferred but the deferral on growth in annuities is unnecessary when your IRA account already carries that benefit. And while the IRS may penalize you for an early withdrawal from an IRA (before age 59 ½), you may be eligible for hardship exceptions when you’re faced with an “immediate and heavy” financial need such as college tuition for a child, necessary home repairs, medical expenses and the like. Conversely, annuities always charge surrender penalties for early withdrawals and there are most likely no hardship exceptions. In any event, surrender penalties may run much higher than the 10% IRS penalty even when there is no hardship exemption applicable.

Each situation is different and we are not dispensing specific legal advice here, but we caution you to tread slowly when considering investing your IRA in annuities. It may not be a winning proposition. Your agent may try to convince you that the returns are higher but be careful. Returns are never guaranteed and commissions and fees may eat up even the best of returns. Long term you’re probably no worse off simply investing your IRA in the market and could in fact be much, much better off by avoiding annuities entirely

Some of the major annuity and life insurance providers in California are:

Contact Us

If you or a loved one been sold an unsuitable annuity please contact the Evans Law Firm financial elder abuse and annuity and life insurance attorneys at (415) 441-8669, or by email at info@evanslaw.com. Our attorneys have experience with complex financial contracts and large insurance companies. We can help guide your case through a FINRA arbitration, jury trial or toward an equitable settlement. We handle cases involving physical and financial elder abuse, qui tam and whistleblower law, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.

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