Absolute Retirement Solutions

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Rolling Over a 401(k) or IRA into an Annuity

Many retirees and people approaching retirement wonder what to do with the funds in their qualified retirement accounts. One option to consider is using part of those funds to purchase an annuity. Unlike most funds held within a qualified retirement plan, an annuity can turn a lump sum of money into a guaranteed income that you can rely on for the rest of your life, no matter how long you live. In addition, annuities can provide principal protection of your money and a death benefit for your beneficiaries. Tax-deferred retirement accounts such as employer-sponsored 401(k) accounts and IRA accounts can be directly rolled over into an annuity tax-free in most cases. If you are concerned about outliving your money and want to turn your savings into a reliable stream of income, a 401(k) or IRA rollover to an annuity may be the solution that meets your needs.

A direct transfer (rollover) means that qualified funds are transferred from one trustee to another trustee without actually being handled by the owner. A direct transfer is a non-taxable event since the owner is not taking possession of any funds. The transferred money can continue to grow tax deferred in the new account until withdrawn in retirement.

Most people only use a portion of their retirement savings to purchase an annuity. You should consult with a qualified financial professional to decide if an annuity is right for you, what type of annuity suits your goals, and how much of your savings should you spend on it. Although some annuities can provide the potential for modest growth, they typically aren’t the right choice for a retiree who wants their assets to continue to see market-type growth. Annuities are better suited for retirees whose main priority is guaranteed income that they can count on.

If you are unsure of what you should do with the funds in your 401(k) or IRA, you can consult with a retirement professional at Absolute Retirement Solutions. We provide a wide range of services related to annuities and retirement strategies that we tailor to fit the unique needs and goals of each client we work with. Contact us today to discuss your goals and start exploring the solutions.

Annuities are long term vehicles designed for retirement income and may not be suitable for everyone. They involve fees and charges, including surrender charges for early withdrawals. Be sure to carefully review all information about any annuity you are considering before making a purchasing decision. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing company.

Annuity withdrawals are subject to ordinary income taxes, and if taken before age 59-1/2, will be subject to an additional 10% federal penalty.

Purchasing an annuity within a retirement plan that provides tax deferral under

sections of the Internal Revenue Code results in no additional tax benefit. An annuity should

be used to fund a qualified plan based upon the annuity’s features other than tax deferral.

All annuity features, risks, limitations, and costs should be considered prior to purchasing an

annuity within a tax-qualified retirement plan.