- 1). Liquidate your annuity contract, or at least take out a partial withdrawal if you cannot contribute the entire contract value. You can only contribute cash to an IRA, unless you transfer a contract housed inside a SEP-IRA or qualified plan directly into an IRA or Roth IRA.
- 2). Notify your annuity carrier that you wish to transfer your contract into an IRA. If you move the contract into an IRA sponsored by your annuity carrier, the carrier may be able to liquidate an appropriate amount of your current contract and repurchase it inside an IRA without penalty.
- 3). Complete transfer paperwork and submit it to your retirement plan custodian if you are leaving your employer and wish to move your qualified plan annuity into an IRA. This paperwork will be available from your IRA custodian. It will take a few weeks to process, and you can transfer your contract directly into a Roth IRA if you wish, although you will have to pay income tax on the contract balance.
- 4). Liquidate your contract if you have no other option. Notify your carrier that you wish to terminate your contract and pay the taxes and any penalties on the sale. Again, this will take a few weeks to process.
- 5). Allocate your cash into the investment of your choice once it's inside the IRA. Don't just leave it in cash, unless you plan to withdraw it soon. You can repurchase the same annuity contract, even if the carrier charges you a withdrawal penalty for canceling your previous contract. However, it would probably not be wise to pay the penalty and taxes on your contract just to house it in an IRA.
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