Guide
Roth conversions with annuities
How to combine Roth IRA conversions with annuities to create tax-free guaranteed income for life. Carrier details, the mirrored contract process, real examples, and IRS rules.
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What is a Roth conversion?
A Roth conversion moves money from a Traditional IRA (or other pre-tax retirement account) into a Roth IRA. You pay ordinary income tax on the converted amount in the year of the conversion. In exchange, the money grows tax-free inside the Roth, and all qualified withdrawals in retirement are completely tax-free.
There is no income limit on Roth conversions and no limit on how much you can convert in a single year. A partial conversion strategy — converting a portion each year — lets you spread out the tax burden and stay within your current bracket.
The core trade-off
Pay taxes now at today's known rate, in exchange for eliminating all future taxes on growth and income.
With many provisions of the 2017 Tax Cuts and Jobs Act potentially expiring, today's rates may represent a window of opportunity.
Why combine Roth conversions with annuities?
Tax-Free Guaranteed Growth
A MYGA or FIA inside a Roth IRA locks in guaranteed growth, and all interest accumulates tax-free forever.
Tax-Free Lifetime Income
An FIA with an income rider inside a Roth generates guaranteed lifetime income that is 100% tax-free.
No RMDs During Your Lifetime
Roth IRAs have no Required Minimum Distributions during the original owner's lifetime. You control withdrawals.
Income-Tax-Free Death Benefits
Beneficiaries receive Roth distributions income-tax-free — combined with an annuity death benefit, a powerful legacy tool.
Protection From Tax Increases
Once money is in a Roth, it's immune to future tax-rate changes.
Principal Protection
Unlike stocks or bonds inside a Roth, FIAs and MYGAs guarantee your principal from market losses.
How in-contract conversions work: the mirrored contract
Several leading carriers now let you convert the tax status of an existing annuity from Traditional IRA to Roth IRA without surrendering the contract. Here's how it works:
- When you request a partial Roth conversion, the carrier creates a new mirrored or child contract that is a copy of the original. Only the tax qualification changes.
- The mirrored contract retains the same effective date, contract features, riders, beneficiaries, allocations, credited rates, and surrender charge schedule as the original.
- No surrender or withdrawal charges apply to the conversion itself, because the money never leaves the carrier — it simply changes tax status.
- You receive a confirmation letter and the new contract number. Tax documentation (Form 1099-R and Form 5498) is issued for the conversion year.
The key advantage
You don't lose years of roll-up growth, don't start a new surrender schedule, and don't sacrifice any product features.
The Roth contract is an exact mirror of the original — with the tax treatment changed to your benefit.
Carrier by carrier: how each handles conversions
Athene Annuity and Life Company
A+ AM Best
- Creates a parent and child contract system. Each child contract receives the same number with a sequential letter suffix (A, B, C).
- Eligible: all contracts including the Annexus BCA 2.0 line, Ascent Pro, and Ascent Pro 10 Bonus.
- No minimum conversion amount (but each contract must maintain $2,000 to remain active).
- Restriction: only one partial Roth conversion per contract year. Not within 28 days of the contract anniversary, or if an income rider has been activated.
Allianz Life Insurance Company
A+ AM Best
- Multiple partial conversions result in multiple separate Roth IRA contracts, each identical to the original.
- Important restriction: full or partial internal Roth conversions are not allowed once lifetime withdrawals have begun.
- Offers both full and partial (staged over multiple years) Roth IRA conversions.
North American Company & Midland National
A+ AM Best
- Both carriers are part of Sammons Financial and use the same mirrored contract approach.
- Creates a new converted contract with the same terms, features, and riders as the original.
- No surrender charges on the conversion amount.
Worked example: Allianz Benefit Control
Lee, age 58 — $100,000 Traditional IRA, 24% tax bracket
Lee converts $100,000 directly into an Allianz Benefit Control Annuity designated as a Roth IRA. He pays $24,000 in federal income tax from non-IRA funds.
He chooses the Accelerated Option: 25% premium bonus and 250% interest bonus factor. With 3% average annual credits, his PIV grows to $207,381 after seven years.
At age 65, the payout rate is 4.50%. Annual income: $9,332/year — 100% tax-free.
After 20 years of income, Lee would have avoided $75,665 in federal income taxes. Subtracting the $24,000 conversion tax, his net tax savings is $51,665.
Frequently asked questions
Is there a limit on how much I can convert to a Roth?
Do I lose my annuity's surrender period with an in-contract conversion?
What carriers support in-contract Roth conversions?
What happens to my income rider during a Roth conversion?
Disclosure: Roth conversions involve complex tax considerations. This page is educational and does not constitute tax or legal advice. Consult a qualified tax advisor before executing any conversion strategy. IRS references: Publication 590-A, Publication 590-B, and irs.gov/taxtopics/tc451.
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