Many people build their retirement savings through employer-sponsored 401(k)s or individual retirement accounts (IRAs). Those savings can help give you confidence about your financial future.
But if you're concerned you might
What types of retirement accounts can roll into an annuity?
You can roll your savings from various retirement accounts into an annuity. Here are the most common types of eligible accounts:
Funds from a
You can also move funds from a
401(k), 403(b) & 457(b) plans
What are the tax implications for rollovers to annuities?
Following rollover rules is important, especially because of the potential tax ramifications if you miss something. There are three options: a direct rollover, an indirect rollover from an employer plan, or a transfer from one IRA to another. Each has potential advantages, complexities and tax implications.
For example, if you choose a
Indirect rollovers from an employer plan
A less common approach is for you to take a distribution from your employer plan. Then you have 60 days to roll it over into an IRA. You could roll this money into an IRA annuity. An
If you are changing products but the plan itself is staying the same, this is typically done by a
What are the benefits & disadvantages of a rollover?
Every financial product has its pros and cons. Part of learning more about your retirement savings and income options is understanding which works best for your needs.
Some advantages of rolling a retirement money into an annuity include:
- Guaranteed income. The biggest
benefit of an annuityis it can provide guaranteed income for life, giving you confidence you'll have a steady income and won't run out of money in retirement.
- Payout flexibility. Depending on the
type of annuityand contract you choose, you may be able to build a payment schedule around your needs.
- Death benefits. Annuities often provide death benefits which are insurance features that you may be interested in.
Some disadvantages of moving retirement money into an annuity include:
- Fees and expenses. Annuities may have a variety of fees, ranging from management to administrative, as well as potential charges for riders. Compare any fees and expenses with the insurance features the annuity may provide.
- Liquidity issues. You may have to pay
surrender chargesif you withdraw funds earlier than the annuity specifies in its contract.
Guaranteed retirement income: Ways to make your savings last
What to think about when considering moving money to an annuity
Depending on your current savings and retirement plans, an annuity may fit your needs. Consulting a financial advisor is a great way to determine if it's right for you. Here are three things to consider:
1. Annuities can help you with savings longevity
Annuities may provide guaranteed income for the rest of your life. If you're worried you may not have enough savings or have fears about
2. Annuities can give you some product diversity
Annuity rollovers don't have to be all or nothing. You can keep a portion of your IRA, 401(k) or other retirement savings in their current products while moving some money to an annuity. This can offer the insurance features provided by annuities for some of your retirement savings.
3. However, consider annuities in context of your other investments
Annuities aren't a fit for everyone. It will depend on your retirement goals and financial situation. A financial advisor can help you strike the right balance with the tools that work for you.
What are some best practices for moving money to an annuity?
Before rolling over funds from any retirement account into an annuity, remember a few considerations:
- Understand the fees associated with the annuity. They may vary depending on the type and contract.
- Realize the tax implications and rollover rules. Rolling over funds in a way that's not allowed may result in penalties.
- Do your research. There are a variety of annuities, each with different benefits, disadvantages and risks.
Get professional guidance on annuity rollovers
People choose to rollover retirement savings into an annuity for various reasons. While annuities aren't the best fit for everyone, they can offer real advantages for some individuals and situations.
Getting guidance on annuities, rollover rules and how they fit into your financial plan can help. A local