Own an inherited annuity? Stretch your assets with a low-cost, tax-efficient option

Save money by switching your inherited annuity to the Vanguard Variable Annuity.OCTOBER 2016

If you inherit an annuity contract, one of the most important decisions you need to make is how you’ll claim the assets.

If you don’t need the inherited assets right away and want to minimize immediate tax implications, consider taking a stretch distribution. This option allows you to take annual distributions from an annuity over your life expectancy, which limits your short-term tax liability.

While you take distributions, the remaining assets in your annuity stay invested, giving your assets continued opportunity to grow. And if you need to withdraw more than your annual distribution in any given year, you can access your funds without penalty.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of Kiplinger’s expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of Kiplinger’s expert advice - straight to your e-mail.

Sign up

Consider costs

Costs count because they can eat into your investment return—especially over the long term if you decide to take a stretch distribution. Take control of what you pay to invest by choosing a low-cost Vanguard Variable Annuity.

With an average expense ratio of 0.54%, the Vanguard Variable Annuity's costs are more than 70% below the annuity industry average of 2.24%. This difference can save you an average of $1,700 a year in fees for every $100,000 you invest.

*Source: Morningstar, Inc., as of December 2015. The Vanguard Variable Annuity has an average expense ratio of 0.54%, versus the annuity industry average of 2.24%; excludes fees for optional riders. Actual expense ratios for the Vanguard Variable Annuity range from 0.44% to 0.73%, depending on the investment allocation. The expense ratio includes an administrative fee of 0.10% and a mortality and expense risk fee of 0.19%. The expense ratio excludes additional fees that would apply if the Return of Premium death benefit rider or Secure Income (Guaranteed Lifetime Withdrawal Benefit) rider is elected. In addition, contracts with balances under $25,000 are subject to a $25 annual maintenance fee.

Use our deferred variable annuity cost calculator to see if you’re paying too much for your variable annuity, or call 800-873-0201 for a free assessment of your current annuity. Our annuity specialists don’t work on commission, so you’ll get an unbiased evaluation with no obligation.

The Vanguard Variable Annuity offers a diverse lineup of stock, bond, and money market portfolios and has no commissions or purchase fees. You can exchange money tax-free among portfolios without incurring transaction fees, and there's never a surrender charge if you decide to move your contract.

Switch to the Vanguard Variable Annuity

The Vanguard Variable Annuity, which offers a stretch option, is issued by Transamerica Premier Life Insurance Company and, in New York State only, by Transamerica Financial Life Insurance Company.

If another provider holds your annuity, you may be able to transfer it to Vanguard without tax liability. (This is called a 1035 exchange.)

To determine if you can transfer your annuity to Vanguard, give us a call at 800-873-0201 between 8 a.m. and 8 p.m., Eastern time to speak with a licensed, noncommissioned annuity specialist.


This content was provided by Vanguard Annuity and Insurance Services. Kiplinger is not affiliated with and does not endorse the company or products mentioned above.