{"id":196900,"date":"2025-10-02T10:16:12","date_gmt":"2025-10-02T10:16:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/196900\/"},"modified":"2025-10-02T10:16:12","modified_gmt":"2025-10-02T10:16:12","slug":"should-you-roll-over-your-401k-into-an-annuity-heres-when-it-makes-sense","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/196900\/","title":{"rendered":"Should You Roll Over Your 401(k) Into an Annuity? Here\u2019s When It Makes Sense"},"content":{"rendered":"\n

Preparing for retirement<\/a> involves a lot of decision-making, and some of it isn\u2019t as glamorous as choosing where to take your first long vacation. One of the biggest decisions you\u2019ll face is what to do with the decades\u2019 worth of savings you\u2019ve accumulated in your 401(k)<\/a>.<\/p>\n

For You: Here\u2019s How Much You Need To Retire With a $100K Lifestyle<\/a><\/p>\n

Learn About: 3 Advanced Investing Moves Experts Use to Minimize Taxes and Help Boost Returns<\/a><\/p>\n

For some retirees, staying the course \u2014 keeping their money invested and managing withdrawals \u2014 is the wisest approach. However, others may wonder about the prospect of rolling those funds into an annuity<\/a>.<\/p>\n

These retirees are often tempted by the promise of guaranteed income for life<\/a> \u2014 after all, who doesn\u2019t want a safe, simple way to ensure long-term financial security? But like any decision, this one comes with potential trade-offs, such as high fees or limited flexibility. However, rolling your 401(k) into an annuity may make sense in specific circumstances.<\/p>\n

To help you understand if this decision could work for you, GOBankingRates spoke with two experts.<\/p>\n

Ron Tallou, wealth management advisor at RJP Estate Planning<\/a> likens the annuity to a Swiss Army knife among retirement products. His reasoning lies in the versatility of different types of annuities and how they can be structured to solve a range of retirement concerns.<\/p>\n

\u201cThere are annuities designed for growth purposes; some are designed with income as the main output, others for safety reasons, and others for death benefit or [long-term care] concerns,\u201d he said.<\/p>\n

His advice is to consider an annuity rollover when you\u2019re closer to retirement or in the early stages of it. Tallou notes that most 401(k) plans<\/a> don\u2019t allow for in-service distributions while you\u2019re still working and under age 59\u00bd. Simply put, you\u2019ll have to wait until then to move your money from a 401(k) into an annuity.<\/p>\n

\u201cPrior to that, I would say not to make the change because you are likely limiting your returns. In 401(k)s, you can typically see higher returns at lower plan costs,\u201d he said.<\/p>\n

Read Next: I Help People Retire Every Day \u2014 Here\u2019s the Most Common Retirement Mistake People Make<\/a><\/p>\n

Tallou says the biggest mistake retirees make when rolling money into an annuity is choosing one that doesn\u2019t align with their retirement goals<\/a>. There are different kinds of annuities, and some are better suited to certain financial needs than others.<\/p>\n

Fixed annuities: \u201cFixed annuities<\/a> are ideal for investors who want guaranteed returns,\u201d he said. \u201cThe interest rate is predetermined for a set period of time, so there\u2019s no guessing \u2014 you\u2019ll know what you will earn ahead of time.\u201d<\/p>\n

Fixed indexed annuities: These are better suited for people who want to protect their principal while seeking potentially higher returns than fixed annuities typically offer.<\/p>\n

Variable annuities: \u201cVariable annuities<\/a> are ideal for investors focused on accumulation. They offer a wide range of sub-accounts that can be conservative or very aggressive,\u201d Tallou said. \u201cVariable annuities can look very similar to 401(k)s in terms of behavior.\u201d They can also provide a guaranteed income stream or some downside protection, but not full protection like a fixed indexed annuity, he noted.<\/p>\n

Income annuities: These are best for investors primarily concerned about outliving their savings. \u201cIncome annuities allow you to purchase your own pension plan and can set up income for the rest of your life \u2014 and even your spouse\u2019s,\u201d he said.<\/p>\n

Story Continues <\/p>\n

Tallou also advises retirees to consider annuities that offer riders for an additional cost. These riders can enhance plan benefits in ways that support long-term care or family support goals.<\/p>\n

\u201cSometimes you can add a death benefit that would pay your loved ones a greater amount than your actual balance,\u201d he said. \u201cThese riders can also help retirees concerned with nursing home costs.\u201d<\/p>\n

Chad D. Cummings, Esq., CPA and CEO of Cummings & Cummings Law<\/a>, always warns clients to understand the fees associated with annuities.<\/p>\n

\u201cFees can be devastating. A $250,000 variable annuity with a 2.5% combined fee structure consumes $6,250 annually, regardless of market performance,\u201d he said. \u201cOver 20 years, that\u2019s $125,000 in cumulative drag. Riders for guaranteed income or long-term care benefits often add another 0.5% to 1% per year.\u201d<\/p>\n

As you work with your financial advisor<\/a> to determine whether rolling your 401(k) into an annuity is right for you, be sure to ask detailed questions about fees and potential costs.<\/p>\n

Tallou also encourages retirees to ask about the length of the annuity contracts. Since annuities are insurance contracts with carriers, investors should know how long their money must stay invested \u2014 and whether that aligns with their retirement time horizon.<\/p>\n

Additionally, he says investors need to understand withdrawal rules.<\/p>\n

\u201cAnnuities typically restrict your withdrawals for a certain number of years, and investors need to know how much they can withdraw \u2014 and whether that fits their needs,\u201d he said. \u201cThey should always ask about the costs and fees involved. Ask how much the annuity will cost compared to keeping the money in the 401(k) plan.\u201d<\/p>\n

Deciding to roll over your 401(k) into an annuity shouldn\u2019t be done lightly. It requires a clear understanding of your retirement goals and how the annuity\u2019s structure and fees align with them. For some, annuities can offer a more stable income stream in retirement<\/a>. For others, the fees and restrictions may outweigh the benefits.<\/p>\n

As always, working with a trusted financial professional can help ensure you make the right decision for your long-term financial security.<\/p>\n

This article is part of GOBankingRates\u2019\u00a0Top 100 Money Experts\u00a0series, where we spotlight expert answers to the biggest financial questions Americans are asking. Have a question of your own?\u00a0Share it on our hub<\/a>\u00a0\u2014 and you\u2019ll be entered for a chance to win $500.<\/p>\n

More From GoBankingRates<\/p>\n

This article originally appeared on GOBankingRates.com<\/a>: Should You Roll Over Your 401(k) Into an Annuity? Here\u2019s When It Makes Sense<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Preparing for retirement involves a lot of decision-making, and some of it isn\u2019t as glamorous as choosing where…\n","protected":false},"author":2,"featured_media":196901,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[28,1667,147,530,113943],"class_list":{"0":"post-196900","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-guaranteed-income","10":"tag-personal-finance","11":"tag-personalfinance","12":"tag-variable-annuities"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/196900","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=196900"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/196900\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/196901"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=196900"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=196900"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=196900"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}