Dan Hopwood
    Sales, Retirement Planning Store, Inc., illinois
    The answer is yes.  Combining two annuities into one can be done through an IRS Section 1035.  This is a simple process, the agent will simply fill out two 1035 transfer forms and submit it with the new application.  This is all assuming your annuities are Non-qualified dollars.

    If you have qualified monies, you can still transfer two annuities into one.  Instead of using a sec. 1035 transfer, the agent would simple use a transfer form specifying as a direct transfer.
    Answered on March 6, 2014
  2. 2777 POINTS
    Terry A. McCarthy, CLU, ChFC
    President, Insurance Associates Agency Inc., West Chester, OH
    While the answer is - "YES", you can combine annuities - it is important to bear in mind that some annuities have different tax treatment than others. My advice is to only combine annuity money of a similar nature with that of another. For example, an IRA (individual Retirement Account) provides a deduction on the IRS 1040 against income. Because of this feature and tax benefit, all money coming out of an IRA, both interest and basis, are taxed as income upon distribution. In other words, because of the tax deduction, distributions from an IRA are taxed as if all the money coming from the account is being taxed for the first time.

    An ordinary tax qualified annuity, a non-IRA annuity, incurs taxation only on the gain at the time of distribution. This exclusion formula recognizes that some of the money deposited was already taxed as ordinary income when you first earned it and this money will not be taxed again at distribution.

    That is why I suggest honoring the character of the money and keeping IRA's with IRA's, etc. This simple rule of thumb will help relieve you of explaining years later the source or the money and help you argue successfully that some money should not be taxed. Who among us will remember 30-40 years hence how these accounts were merged?

    There are a whole other set of rules for conversions and methods to avoid taxation prior to annuitization and the beginning of the payout period of your annuities. This answer covers general theory only on the idea you want to minimize taxation to the largest extent possible.
    Answered on January 25, 2016
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