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Annuity rollover rules: Options & considerations

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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 outlive your IRA or 401(k) savings, you may want to consider rolling your retirement plan assets into an annuity. Annuities are designed to help accumulate retirement money and offer options to start a retirement income that can last as long as you live. As you explore the option of rolling your retirement plan assets into an annuity, it's helpful first to understand the rules.

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:

Traditional IRA

Funds from a traditional IRA can be moved from another product into an annuity. Your money stays tax-deferred because the plan (traditional IRA) stays the same. You are just moving to a different type of retirement product, the annuity.

Roth IRA

You can also move funds from a Roth IRA from another product into a Roth IRA annuity. Your retirement money can continue to grow tax-deferred and withdrawals will be tax-free as long as you meet the Roth IRA rules.

401(k), 403(b) & 457(b) plans

If you've left an employer where you had a 401(k), 403(b) or 457(b) plan, you can roll those funds into a traditional IRA annuity.

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.

Direct rollovers

With a direct rollover, your employer sends your retirement funds directly to an annuity IRA. This is typically the most straightforward approach. Generally, your employer and financial institution will do most of the work for you; you'll just need to sign authorization paperwork.

For example, if you choose a direct rollover from a 401(k) to an annuity IRA, you typically won't see tax ramifications because it is handled directly.

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 indirect rollover from an employer plan is more complicated, and it is important that all paperwork be completed correctly.


If you are changing products but the plan itself is staying the same, this is typically done by a transfer. For example, if you have a traditional IRA in one product and you want to move the money to a traditional IRA in an annuity, the two financial institutions will move the money through a transfer. A transfer has no tax consequences or reporting requirements. You will just need to complete paperwork with the financial institutions.

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 annuity is 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 annuity and 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 charges if you withdraw funds earlier than the annuity specifies in its contract.
4.11.35 Thrive_Deferred Income Annuity-1036x500.png

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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 Social Security, an annuity may help alleviate some of those concerns. For example, you may want annuity income to cover your fixed expenses in retirement.

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 Thrivent financial advisor can take you through the complexities and financial implications to guide you to a decision that aligns with your goals.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.

Thrivent financial advisors and professionals have general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration.

Guarantees based on the financial strength and claims paying ability of Thrivent.

Holding an annuity inside a tax-qualified plan does not provide any additional tax benefits.

There may be benefits to leaving your account in your employer plan, if allowed. You will continue to benefit from tax deferral, there may be investment options unique to your plan, fees and expenses may be lower, plan assets have unlimited protection from creditors under Federal law, there is a possibility for loans, and distributions are penalty free if you terminate service at age 55+. Consult your tax professional prior to requesting a rollover from your employer plan