Can You Roll Over an IRA Into a Non-Taxable Annuity?

The IRS allows tax-free IRA rollovers into qualified annuities.
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If you want to roll over your individual retirement account into a non-taxable annuity, you're in luck. The IRS allows this sort of rollover and does not charge any taxes or penalties on the transfer. When handling your rollover, be sure to move your IRA into a qualified annuity or the IRS will consider your transfer a taxable withdrawal.


A rollover is a transfer from one retirement account to another. This is a way to take advantage of the benefits of another retirement plan. The IRS does not want to prevent people from saving for retirement so it does not penalize these transfers. Done properly, a retirement plan rollover should not create any extra tax liabilities. Since IRAs and annuities are both considered retirement plans, you are allowed to roll over your IRA into a non-taxable annuity.

Qualified Annuities

All annuities offer non-taxable growth. You do not owe taxes on your annuity gains until you start taking withdrawals from your account. There are two types of annuities: qualified and non-qualified. Qualified annuities are funded with before-tax dollars, money from retirement plans. Non-qualified annuities are funded with after-tax dollars. When you roll over your IRA, you should select a qualified annuity to avoid taxation on your IRA.

Non-Qualified Taxes

If you move your IRA into a non-qualified annuity, you will run into problems. The IRS treats this transfer as a total withdrawal from your IRA. You would need to pay income tax on your entire account balance. If you are under 59 1/2, you also need to pay an extra 10 percent penalty on your withdrawal.

Rollover Benefits

There are two main reasons for rolling over an IRA into an annuity. If you move your IRA into a fixed annuity, you guarantee a fixed rate of return. The annuity company agrees to pay you a certain return on your money no matter what happens in the stock market. An annuity also can guarantee you life income. If you move your IRA into a life annuity, your annuity will give you monthly payments for the rest of your life. This rollover guarantees that you will never outlive your retirement income.

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