Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Can I transfer an annuity into a Roth IRA?

Yes, you can transfer an annuity into a Roth IRA! Before you make the decision to do this, however, you need to understand what’s involved in transferring your annuity into a Roth IRA and what penalties and fines you can expect to pay if you make the decision to make the transfer.

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Before you consider this type of investment, you need to understand what a Roth IRA is. First of all, the name Roth for the Roth IRA comes from the senator that created the legislation for this type of retirement option, Senator William Roth.

IRA stands for Individual Retirement Account, but a Roth IRA and a traditional IRA have many differences. First of all, in order to purchase a Roth IRA, you have to make under $95,000 annually as a single person and under $150,000 annually as a married person.

Another distinction is that a Roth IRA isn’t tax deductable but a traditional IRA is tax deductable. It is on the back end that you will see significant savings as both your capital and interest are tax free on a Roth IRA, whereas all of your contributions to a traditional IRA are taxed once you collect on them.

What do I need to know about the differences?

  • Both a Roth IRA and a traditional IRA have annual maximum contributions of $5000 if you are under 49 and $6000 if you are over 49. An annuity doesn’t have those restrictions, which means you can contribute as much as you want to annuity. This could pose a problem, however, if you are thinking about rolling your annuity into a Roth IRA as if you have more than the maximum contribution amount in your annuity then you cannot roll the entire amount into a Roth IRA.
  • If you surrender your annuity or withdraw more than 10% from your annuity before you are fully vested in it, then you will have to pay penalties to the holder of your annuity (typically an insurance company) as well as a 10% penalty tax to the government. Fortunately, there is a way that you can avoid the penalties while still investing in a Roth IRA if you want to.

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How can you avoid penalties while contributing annuity money to a Roth IRA investment?

There are two ways that you can avoid penalties while contributing annuity money to a Roth IRA. The first way is to wait until you are fully vested in your annuity before you make the decision to invest in another retirement plan. In this case, you will have to wait for your contract be fulfilled in order to avoid fees from your insurance company.

If your contract is up before you are 59 and 1/2 years old, then you will have to reinvest all of your return on your capital (your profit) in order to avoid the 10% penalty tax on your investment.

If your contract isn’t up and you still want to invest in a Roth IRA, then you need to stay within your withdrawal allowance in order to avoid the penalty fees. You are allowed to withdraw up to 10% of your total investment annually. If you have a large annuity, then this could be the perfect option for investing in other opportunities. If your annuity is small, then this may not be the ideal choice.

Should you invest in a Roth IRA?

The truth is that no one can answer this question better than you can. Because a Roth IRA is an investment in stocks and bonds, there is more risk to this investment than if you invest in an annuity. The question you need to ask yourself is how much of a risk are you willing to take on your investment or do you want a guaranteed investment, which is what a fixed annuity offers you.

Where can you invest in a Roth IRA?

You can invest in a Roth IRA from your insurance company or you can choose a bank, mutual fund company or a brokerage firm to provide your Roth IRA. It is in your best interest to shop around before you decide where to purchase your Roth IRA from because different firms and companies charge different prices and offer different investment alternatives.

For example, a brokerage firm offers a wider range of investment choices for your Roth IRA, but this wider range of choices means that you could lose more money and have a harder time pinpointing the best investment choice. An insurance company typically focuses on investing in annuities, which offer you a lower risk investment, which is great but also leaves you with lower profit possibilities.

If you start with our free quote tool, you can quickly compare fees and options between companies that can offer you’re a Roth IRA. It is easy to use and you aren’t under any obligation to make an investment with any of these companies.

Enter your zip code and start comparing Roth IRA and annuity quotes now!