401(k) and IRA Rollovers Into Annuities
An Old Account, and a Decision Worth Walking Through
You changed jobs and left a 401(k) behind, or you’re getting close to retirement and wondering whether part of your savings should be somewhere with guarantees. Moving money into an annuity is one option. It isn’t the only one, and it isn’t always the right one.
What You Might Get
- Lifetime income. Some annuities can pay income for life, under the terms of the contract.
- No direct market losses. A fixed or fixed index annuity isn’t invested in the market. Charges and fees can still reduce your value.
- One place to look. Some people would rather have fewer accounts to keep track of.
What You Might Give Up
- Your plan’s features. A 401(k) may have lower‑cost funds, loan options and creditor protections an IRA or annuity may not match.
- Access. Surrender charges apply if you take out too much during the first several years.
- Growth potential. Limits on interest mean you won’t get all of a good year in the market.
- A tax benefit you already have. An IRA or 401(k) is already tax‑deferred. Putting an annuity inside one adds no extra tax deferral, so the reason to do it has to be something else, such as guaranteed income.
How a Rollover Generally Works
Most plans let you move your money once you leave the job, and some allow it sooner. A direct rollover, sent straight from one company to the other, generally avoids current taxes. If a check is made out to you instead, tax may be withheld, and you may owe more. Check with your plan and your tax professional before you start.
Where I Come In
My part is education. I can explain the annuity side and show you what it costs. I’m not an investment adviser, so I won’t tell you whether to sell any particular investment or how your 401(k) should be invested. Some people leave it alone or move only part of it. That decision is yours, with your tax or investment professional.
This page is general information, not tax or investment advice. Guarantees depend on the financial strength and claims‑paying ability of the issuing insurance company. Annuities are not FDIC insured.
Frequently Asked Questions
Can I roll my 401(k) or IRA into an annuity?
Usually, once your plan allows it, which is often when you leave the job. An IRA can generally be moved at any time. A direct rollover generally avoids current taxes. Before you do it, compare what you'd give up, such as the plan's investment choices, costs and protections, with what you'd get. An annuity inside an IRA adds no extra tax deferral, and surrender charges limit your access. Leaving the money where it is may be the better answer.
Learn what to weigh →What is a surrender charge?
It's what the insurance company charges if you take out more than the contract allows during the first several years. The charge usually shrinks each year until it reaches zero. Many contracts let you take out a set amount each year without one. Before buying, find out how long the period lasts and what the charge is in each year. If you already own an annuity, those numbers are in your contract.
Do you manage investments or give investment advice?
No. I'm licensed to sell insurance, and I'm not an investment adviser or a securities broker. I don't manage investment accounts, and I don't tell people which securities to buy or sell. My work is insurance products: life insurance and annuities. Managing a portfolio takes a registered investment professional, and that isn't what I offer.