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Annuity Specialist

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IRA or 401k Rollovers

How To Rollover An IRA or 401k Into An Annuity

Rolling Your IRA or 401(k) into an Annuity

Tax-protected retirement savings accounts, such as IRAs or 401(k) plans, can be directly rolled over into an annuity tax-free as long as you follow the IRS’s requirements.

This allows you to use some of the "higher-risk" portion of your retirement portfolio to fund your retirement and transfer it directly into an annuity without tax consequences.

Having a basic understanding of how this process works will give you more confidence when it comes time to start transferring some of your portfolio into annuities.

Creating Your Own Pension

Imagine you’ve built up a sizable retirement savings in your employer-sponsored retirement plan or your own IRA account, and you’re getting ready to retire. But without a pension, how do you make sure you have continuous income to fund your retirement years? Social Security likely won’t get the job done. It’s too small of an income, and who knows how long it will be there.

So how do you use your savings to fund your retirement and create your own "pension?

One popular option is to use a portion of the funds to purchase an annuity, which will provide you a stream of income like a pension, by doing what's called a "Rollover".

The income can be structured to last the rest of your lifetime, or, if you are married, for two lifetimes. And if you don’t want lifetime income, you can create an income that lasts for a set period of time — 15 years, for example.

Your Annuity Specialist can help you put a solid plan together, so make sure you request your Custom Annuity Retirement Plan.

There are two types of Rollovers: Direct and Indirect

Direct Rollovers

Direct rollovers occur when qualified funds move from one trustee to another trustee without touching the owner. Under these circumstances, direct transfers are tax-free. Direct transfers are commonly done by mailing or wiring funds directly to the new plan provider, but on some occasions the old plan provider may mail the check directly to you, payable to the new plan provider. This still counts as a tax-free direct transfer.

Indirect Rollovers

Indirect rollovers are more complicated and have significant tax consequences if not executed correctly. Indirect rollovers occur when the participant takes constructive receipt of the funds. In order to remain tax-free, the funds must be rolled over within 60 days of distribution. Otherwise, the distribution is income taxable and may also be subject to the penalty for withdrawing funds prior to age 59½. In some cases, indirect rollovers can be appropriate. But it is often recommended to keep things simple and do a direct rollover.

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What Do You Need To Start A Rollover?

Assuming you're doing a direct rollover, which is what we advise as it's the simplest way to transfer tax-deferred funds, then a 401k or IRA rollover into an annuity is fairly straight-forward.

With that said, always seek professional assistance to make sure it's done correctly, otherwise you could trigger heavy fees and tax penalties.

There are four basic things you need to do:

  1. Gather up your latest statement, which will show the amount you have saved along with how much you and your employer (if applicable) have contributed.
  2. Decide what type of annuity you want to roll your funds into. Fixed and Indexed annuities are the most common for retirement.
  3. The provider you choose will normally set up an account for the funds to be transferred to and will handle most of the paperwork for you.
  4. Once all the paperwork is complete, simply specify that you want your funds transferred directly from the old to the new account.

When Should You Rollover a 401k or IRA?

The answer to this question is different for every individual depending on your specific retirement goals.

However, there are some generals principles to follow that can help you decide when it's a good time to start considering rolling over some of your portfolio into an annuity to provide income and safety.

If you are 59 1/2 or nearing your desired retirement age (within 5-10 years), and have been able to accumulate a sizable amount within your 401k and/or IRA, this is usually a good time to start exploring your annuity options.

Maintaining a large amount of your portfolio in high-volatility assets, like the stock market, mutual funds, etc. can subject your nest egg to unnecessary risk.

These types of assets serve their purpose during your accumulation years to grow your portfolio. During this period, because of younger age, you can handle higher levels of volatility because of the growth potential.

However, when you reach the point in your life when you're looking to

retire soon, safety and income usually becomes a higher priority than the potential for growth.

The good news is that while annuities may not offer the potential for as much growth as a 401k or IRA can provide, the right annuity can actually still potentially provide growth that exceeds inflation.

Check with your Annuity Specialist to discuss your options.


Rolling over your 401k or IRA into an annuity is not a difficult process when done directly and provides a great opportunity to move some of your portfolio into a safer asset.

The key is making sure you're getting the right type of annuity and doing it at an age that will make sure you reach your retirement goals.

As always, our Annuity Specialist are ready to put together a Custom Annuity Retirement Plan specifically for your retirement goals, whenever you're ready. Just click the button below.




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