- 1). Review the variable annuity contract to determine if it is qualified (IRA) or non-qualified (non-IRA). If the annuity is an IRA, transfer the assets tax-free by opening a IRA CD account at your local bank and having the bank conduct a trustee to trustee transfer. If the account is a non-qualified account, a taxable liquidation must be done for you to move the asset.
- 2). Calculate any penalties on the variable annuity. Variable annuities are contracts with insurance companies that require an investor to keep the assets in the account for a pre-determined number of years (anywhere from three to 15 years). If you liquidate the annuity prior to your contract term, you will be assessed a penalty on the balance liquidated, otherwise known as a surrender. The penalty is a percentage of the amount that you pull out that follows a sliding scale starting higher in the early years and generally reducing with each passing year. For example, a seven-year annuity may have a surrender charge schedule of 7 percent, 6 percent, 5 percent, 4 percent, 3percent, 2 percent and 1 percent before going to zero.
- 3). Contact the variable annuity company and request a liquidation form. Fill out the form and submit. Keep in mind that if you are doing an IRA transfer, the bank fills out all paperwork needed for the transfer.
- 4). Open a CD with liquidation proceeds. You will receive a check from the insurance company and can walk into your local bank or shop banks for the best CD rates. Any personal banker in the branch can open the CD for you with the annuity proceeds as long as you have two forms of identification.