Americans for Annuity Protection’s Kim O’Brien offered up eight reasons why it makes sense to roll employer-sponsored retirement plans into annuity products. She wrote two articles for Insurance News Net on the topic, the second of which was “Four More Reasons Rolling Over to an Annuity IRA Makes Sense.” You can be better prepared for your retirement when you use a 401k annuity or rollover IRA funds to an annuity product that will pay you guaranteed lifetime income.
The first four reasons were detailed in O’Brien’s first article and are easily memorable because they all start with the letter C. Annuities give you control over your savings and take it out of the hands of your employer and plan sponsor. By rolling funds together into an annuity, you are able to consolidate multiple plans from multiple employers and make money management easier on your end. O’Brien also says that annuities usually cost less than 401k plans do. She points out that 401k plan fees added to their investment and distribution costs can be higher than 2%. While the cost of an annuity certainly depends on the type of product, they can often be much less than employer-sponsored plan costs. And finally, annuities offer risk certainty that is unmatched elsewhere. Your annuity savings is safe from market losses.
In keeping with her theme, O’Brien’s final four reasons to use an IRA or 401k annuity rollover with your retirement savings all start with the letter P. Annuities offer protection that cannot be found anywhere else. Your money is protected from both market risk and longevity risk. Annuities also protect you from the required minimum distribution rule. Although you certainly don’t have to spend the RMD’s you are required to take from your employer-sponsored plan, you have to take the money out and pay taxes on it. That can be risky because people tend to overspend when the money is there with them. By rolling over your money into a deferred annuity with an income rider, you are guaranteed lifetime income and are free from RMD rules. In some states, an annuity also protects your money from creditors.
Having your money in an annuity will help your heirs avoid probate for that specific money. Trust me, going through probate after the death of a loved one is difficult at best. Since annuities have a named beneficiary, the money is transferred directly to them without having to go through courts and deal with legalities. This can save your heirs a lot of time, money, and headaches.
Charitable gift annuities give you the opportunity to use your money for planned giving. Any money remaining in your annuity upon death will go to your designated charity of choice. These products are low cost, pay you income over your lifetime like other annuity products, and offer tax benefits while you are living. You can also choose to leave the money to your heirs as either a lump sum or payments over a specific time period.
Perhaps one of the most important reasons to rollover your IRA or 401k money into an annuity is for the peace of mind that it offers you and your family. Annuities give you control over your savings options, simplification of accounts through consolidation, lower costs, market loss protection, guarantees that your money will last over your lifetime, ease of fund transfer, and the ability to control your legacy payments. There are many reasons that your retirement plan could benefit from an IRA or 401k annuity rollover.
Written by Rachel Summit