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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13323
Experience:  15years with H & R Block. Divisional leader, Instructor
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Seven years ago I moved from Canada to the United States. Instead

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Seven years ago I moved from Canada to the United States. Instead of buying a home right away I decided to wait a while and I put my nest-egg in a non-qualified, seven year fixed annuity. I am not retired, by the way, and have ten years to go before retiring.

The annuity will mature in a few months. I had thought that I could move the interest made on my annuity into another annuity - essentially rolling over or transfering the tax-free interest I've made into another vehicle - and do something else with my principle, perhaps use it as a down-payment on a home.

I've been told that I can't do this: I can't move the interest into another retirement savings, but have to take it as a distribution.

I'm confused as to what I can and can't do.

Ultimately I want to invest the interest and do something with my principle.

Is there a way to do this?

AM in MN
Submitted: 6 years ago.
Category: Tax
Expert:  Robin D. replied 6 years ago.

HelloCustomer

Unfortunately, you are not allowed to split the annuity amount and use some for one purpose and the rest for another and receive a tax advantage.

The distribution will need to be made if you require to have access to the principle for any purpose.

A reallocation outside of a qualified plan is not usually termed a rollover. A rollover is when you move all the funds from one retirement account into another like account. If you at anytime receive funds then there is a distribution which triggers a taxable event.

You can receive your funds, report the distribution (you will receive a 1099R from the holder showing the taxable amount), and then you can use whatever portion you choose to invest. The interest is not really tax free but tax deferred. You pay tax on the interest when you have a distribution. Since you received no tax benefit from the contribution you made, that portion should not be shown on the 1099R as taxable.

 

I sincerely XXXXX XXXXX information is useful,

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