Minimizing Penalties When Getting Out Of Annuities

Q. I, like others was caught up with an advisor that uses variable annuities and indexed annuities as his "tools" . I have a substantial amount in both (entire retirement assets) and want to go to Vanguard with a "coffeehouse" type portfolio for my retirement. Can I roll over these Annuities when I reach 59 1/2 to Vanguard Index Funds and take the internal loss of the Annuity penalties without getting into more trouble with the IRS? I do NOT take any distribution from these Annuities and didn't plan to until 60. (3 years)

A. It sounds like the money in annuities is retirement money. If they are IRAs then they can be transferred at any time to another IRA without any IRS penalties. Of course, you will have any penalties imposed by the insurance companies on the annuities.

I wouldn't recommend paying penalties if they are over a couple percent. Instead you can transfer out the penalty-free amount each year until the penalties get lower or until all is transferred out.

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