Roll over your IRA, 401(k), 403(b), or lump sum pension payment into an annuity tax-free.

Me | October 14, 2009 | myself

[unique]

Has anyone here completed the transfer as noted above, e.g. transferred their 401K or 403b funds to an annuity with an insurance company, avoiding tax?

If yes, I would think that doing that now would be bad timing, given the low rate environment, correct?

Any thoughts on this subject would be appreciated.

I'm starting to look into options - thinking - fixed-rate for life - joint lives annuity.

[T Minus Four]

self ping

[Pearls Before Swine]

Whenever you look at locking in fixed rate annuities, think about the unit of account. In other words, while it is difficult to forecast foreign exchange rates in general, an annuity contract is a major bet on the long term soundness of the dollar. Think about whether or not that’s a bet you want to take.

[Rick_Michael]

I second that self-ping

[kitkat]

Bob Brinker has some unkind words to say about annuities. Give him a call on his radio show and ask what he thinks about this particular annuity.

[CaptainK]

And check out the fees . Sometimes they are outrageous but well hidden.

[Choose Ye This Day]

You roll it over to an IRA and the annuity is inside the IRA. Then you withdraw as you need to from the annuity, and pay taxes each year on your withdrawal.

If anyone is suggesting you can avoid taxes altogether, they are lying or stoned.

[raybbr]

On a side note. I have about 120K in my 401K. I am 50 and have been out of work while in school. My wife makes a pretty good buck as a nurse. I am thinking of taking the money. It's been in the money market since June of '08 so I actually made some money since then. But, I don't see the govt letting anyone keep their money in about four years.

I really see no prospect of future employment. I have two young sons and four really old vehicles. I have been thinking about taking out some of it and putting the rest into another 401K but really can't see where I would put it.

[kitkat]

My bank tried to sell me an annuity which of course included life insurance. I told them that I didn’t want more insurance for my kids to collect when I died, and that I just wanted to make enough interest to pay my bills w/o having to ask my kids to help me.

For the heck of it, I asked if there was any penalty for quitting early. I was ASSURED there were no penalties. They sent me a brochure. There were TWO penalties for getting out of the annuity. Read carefully.

[screaminsunshine]

Get the cash. Pay the penalty and get the hell out of dodge!

[Frantzie]

Brinker is a mega s*ck up to the Fed and Greenspan plus he has mutual funds running ads on his show. Just pointing out that he is not an unbiased source.

Variable annuities in general are an avoid.

Fixed annuities - interest rate risk plus sinking dollar risk but safer than a lot of options.

Not a lot of great options when you have Mugabe 2 in control.

[spectre]

IMO whole life insurance and annuity instruments make one person financially secure:

The salesman.

[Sunshine Sister]

I transferred my 401k money (when I retired ie early buyout) to a fixed annuity with a guaranteed interest rate with a well known US insurance company. I have been generally happy with the return on that account.

I moved some money from a CD and some of my late husbands retirement $'s to variable annuities and have been generally unhappy with their performance. They lost money at first but as the market is clawing it's way back so are they.

Everything is a crap shoot.

[andy58-in-nh]

There is no such thing as a tax-free annuity. For deferred annuities (essentially, an investment): earnings are taxed as ordinary income on non-qualified accounts. On qualified deferred annuity accounts such as IRA's, 401k's, 403b's, etc - all tax-deferred contributions are fully taxable upon withdrawal, as are any earnings thereon. In addition, surrender charges may apply to annual withdrawals in excess of 10% of the account value (this may vary with some products, which allow scheduled withdrawals based on attained age and/or investment period).

For immediate annuities (ones that offer regular income payments based on a fixed period or on your life expectancy at the time of purchase), distributions are also taxable on earnings or (in the case of qualified money) - on all distributed amounts.

The government also imposes a 10% surcharge on most qualified withdrawals prior to age 59 1/2 (with some exceptions). Bottom line: look before you leap. I used to sell annuities, and more recently helped design them. They can be very valuable asset planning tools but you must understand how they work and whether they are appropriate for your particular financial circumstances.

[doosee]

Let’s see, Geithner, Rangel, Daschle, et. al. have the working strategy. Avoid the taxes and when you get your hearing you forgot you had that money invested.

[majormaturity]

You can roll it tax free - make sure it is done custodian to custodian (ie, never take possession of the money yourself). Also look at Prudential’s and other companies Living benefits - guarantees a minimum of 6% or the market, whichever is greater, each year, and guarantees your retirement income for as long as you and your spouse live - it creates a pension for you - and be sure never to “annuitize” your account!

[clintonh8r]

I was just thinking about this the other day. I have a call in to my financial advisor about it. I’ll post what/when I find out.

[clintonh8r]

You can’t “put” money into a 401(K) except by payroll deduction.

[raybbr]

You can’t “put” money into a 401(K) except by payroll deduction.

Oh, gee. I am so sorry. I should have said roll over most of into another 401K and take some of it out.

Some people. I bet everyone else understood what I meant.