6. Juggling Annuities and Roth IRAs

This factor is unique to annuities. When a client converts a traditional IRA (existing contract) to a Roth IRA, the owner may pay income tax on an amount greater than the contract value. The contract value plus the actuarial present value of any additional benefits equals the “entire interest” of the IRA. It is generally appropriate to reflect the value of these additional future benefits (unvested bonuses, income guarantees, etc) in a conversion.