How to Convert an Annunity to a Mutual Fund
- 1). Get a copy of your annuity account. Make sure you understand all of the fees and charges associated with cashing in your annuity. If you are still within the surrender period of your annuity, this will decrease the amount of money available to you when you cash in the annuity contract.
- 2). If you do not have a variable annuity, but would like to avoid taxes on liquidating your existing annuity contract and take advantage of the mutual funds inside of a variable annuity, you can use a tax-free annuity to annuity exchange. This is called a "1035 exchange" for "like-like" contracts. As long as you are exchanging an annuity for another annuity, this exchange can be done without paying taxes on the account balance of your fixed annuity. You will need a 1035 exchange form from your insurance company to perform this exchange into a variable annuity.
- 3). Choose the mutual funds you want to purchase. If you are having a broker help you, they will set up a brokerage account for you. If you are purchasing mutual funds on your own, you will need to set up your own brokerage account.
- 4). Liquidate the annuity. There will be a form you need to fill out to surrender the annuity and liquidate the account. This form can be obtained from your insurance company. Once you have the form, fill it out and return it. The insurance company will send you a check for your account value, typically within 30 to 45 days.
- 5). Deposit the money into your brokerage account and purchase your mutual funds.
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