While on the subject of annuities this week, here’s another doozey I come across every so often: The IRA Annuity.
As you know, an IRA is a tax-deferred investment vehicle and so is an Annuity. In my advisor practice I find that, occasionally, a new client comes aboard and his portfolio contains one of those rarities.
If you ask your accountant or tax preparer, he will tell you that an IRA Annuity absolutely makes no sense (unless, he happens to be selling these) from a tax stand point.
If that’s the case, how do investors end up with them?
I got the answer many years ago when my wife (an accountant) was conducting an IRS audit for a client.
I was able to sit in for a portion of the audit dealing with investments, and I asked the auditor about IRA Annuities. He laughed and said that they were simply another tool for someone to generate an up front commission. Other than that, they made no sense at all.
So, if you’re being approached about moving your IRA into an Annuity, be warned that this may improve someone else’s financial condition, and not yours.
If you had such an experience, please share it with me.Contact Ulli