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I have a variable annuity that I invested $80,000 into 10 years ago. Performance has been horrible and I'm down to $72,000. I am 38 and want to put into a traditional IRA. Are there tax consequences because I have lost money?

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I'm not sure why you want to put this into a traditional IRA. Variable annuities are already tax-deferred so you're not gaining any tax advantage there.

Depending on your tax situation you could claim a loss if you sell.

  • I think he means to transfer it out of the VA into the IRA. The VA salesmen talk about how great VAs are, guarantees and all, I wonder what happened here. – JoeTaxpayer May 9 '12 at 16:03
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Beware of surrender charges also

Surrender Charges

Many annuities will impose a surrender charge if the annuity is cashed in before a specific period of time. That period may run anywhere from 1 to 12 years. A typical surrender charge is one that starts at 7% in the first year of the contract, and declines by 1% per year thereafter until it reaches zero. The charge is made against the value of the investment when the annuity is surrendered, and its purpose (other than simply to make money for the insurance company) is to discourage a short-term investment by the purchaser. For that reason, an annuity should always be considered a long-term investment. In the typical fixed annuity, though, this charge will not apply provided no more than 10% of the investment is withdrawn per year.

source: http://www.fool.com/retirement/annuities/annuities02.htm

If you've held it for 10 years as you claim, you may not owe any or much in surrender charges, but you definitely want to know what the situation is before you make a move.

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