Transferring whole-life to fidelity annuity

[mtnkrazy]

Hello All,

I am trying to cancel my whole-life insurance policy, and transfer it to a low-cost variable annuity, as suggested by WCI. I called Fidelity today to explain what I wanted to do, and the guy on the phone said that for Fidelity annuities, I have to hold it for at least 10 years (or Fidelity won't let me open an account), and that the basis is not preserved after the transfer. He said something about the annuity being a last-in first-out, and that the earnings would come out first and I'd pay taxes on them. Additionally, he mentioned that it would have a penalty of 10% because I withdrew before retirement. I mentioned to him that I don't want any sort of retirement annuity, but now I'm confused. Is there a specific product that I need to be asking for? I said I wanted to transfer my whole-life into a variable annuity, and when he asked me why, I told him that I wanted to transfer it, have it reach basis, and then cancel the policy. Anyway, I'm wondering what I might be doing wrong, or whether the guy I got on the phone misunderstood me, etc.

I called Fidelity b/c I couldn't get anyone from Transamerica (which I think Vanguard transferred its VA business to) to pick up the phone ... I don't really care where the annuity sits as long as its low-cost and gets me to stop paying for whole life!

Thanks!

[Steven Podnos MD CFP]

I had an old (no load Ameritas) variable life policy with a large gain over basis that I transferred into an Ameritas no load variable annuity without any issues. I could have done the same via Fidelity or Vanguard. I think you talked to the wrong person and should try again

[GasFIRE]

It sounds like there is a failure to communicate, you were given a lot of bad information. The basis is preserved with a 1035 exchange but you don’t have to hold the annuity for 10 years. While it is true that earnings come out first and there is a 10% penalty for withdrawal before 59.5, if you’re just trying to get back to basis 10% of $0 is still $0. While you don’t want a retirement annuity per se, that is what Fidelity calls their variable annuity and is the product to use if you are simply trying to get back to basis.
https://www.fidelity.com/annuities/annuity-exchange
I would call the number in this link. It’s the actual department that handles this rather than depending on the general CSR whose knowledge is usually limited to standard accounts.

[mtnkrazy]

Thank you GasFIRE - I called the Fidelity rep and got the process started!

[BryanMD]

Were you charged a surrender fee by your original policy holder for the 1035 exchange? Was it the Cash Value that rolled over or the Cash Surrender Value?

[Notsobad]

In the process of doing the same thing except with Schwab. I will do the 1035 exchange and delay any withdrawals until the appropriate age. Or leave that problem to the next generation.