Take Advantage of the Tax-Free Rollover Rules to Move Your IRA or 401k into an Annuity
Q. Is it possible to roll over my retirements savings, such as my 401k, IRA, or 403(b) accounts into an annuity without paying taxes?
A. YES. You can roll over your IRA, 401(k), 403(b), or lump sum pension payment into an annuity tax-free. Annuities funded with an IRA or 401(k) rollover are "qualified" plans, enabling an insurance company to create an "IRA annuity", into which you can deposit your retirement funds directly. Additionally, you can have your employer roll over your 401(k) funds into an annuity without withholding any taxes since no mandatory withholding requirements pertain to funds directly transferred into an annuity by an employer.
Q. If I decide to roll over my IRA, 401(k), or lump sum pension payment into an immediate annuity, will I be hit with distribution taxes?
A. NO. While pension and other pre-tax distributions can be subject to taxation when withdrawn, by federal law, you are permitted to roll over such payments into an immediate annuity tax-free because the insurance company automatically creates an IRA account into which your monies are transferred. So essentially these transactions become either "direct transfers" or "direct rollovers" which are tax-free. Taxes will need to be paid on the monthly distributions you receive from the immediate annuity.
Q. Is an "immediate annuity" available for tax-free IRA or 401(k) rollovers?
A. YES, so long as you satisfy the rollover rules described in the previous paragraphs. As its name suggests, an immediate annuity will begin making monthly payments to you on a regular basis shortly after purchase. Immediate annuities payments are determined by a number of factors, including your gender, your age, and your payment option choice.
Immediate Annuity Calculator
Here is an immediate annuity calculator. It calculates the amount of monthly income you will receive in return for a specific "Investment". Investment (aka Premium) is the purchase amount you pay to the insurance company. With this calculator you can also find what Investment would be necessary in order to receive a specific monthly income amount. To use the annuity calculator, simply highlight your age, state, and gender. Then enter a dollar amount in only one of the two boxes labeled "Investment" or "Monthly Income." Click "Calculate" and you will see a table with annuity quotes. Feel free to call 800-872-6684 if you have any questions about annuities or the quotes.
Q. How can I find and purchase an IRA annuity?
A. Locating and purchasing an IRA annuity is easy if you take advantage of the tools we have to offer. Your first step is to review the annuity rates located on our web site. Then select your preferred insurance company, and we will send you both your chosen company's annuity application and a direct transfer authorization form, enabling you to begin the roll-over process immediately. We will assist you in completing the necessary forms, after which the insurance company will complete the transfer. The services we offer are free of charge.
Q. Can I "lock in" an IRA annuity rate before the insurance company receives my distribution?
A. It is possible to obtain a "rate hold" from many insurance companies. Usually, the quoted rate is maintained for several months, typically one to three, while the cash transfer takes place. "Rate hold" periods typically begin once the insurance company is in receipt of all required forms, fully completed. (For more information about the "rate hold" practices of specific insurers, please call 800-872-6684.)
Q. My retirements funds are currently residing in a 401(k) account, held with my employer. How do I roll over these funds to an insurer?
A. Depending on your employer, you will encounter different roll-over rules and procedures for cash release. Your best bet, as a first step, is to contact your human resources department. You might need to fill out employer-specific forms and waivers as many companies will not release your funds based only on the insurer's paperwork. Also, while the most efficient way of handling a rollover is to request that your employer make out the roll-over check to the insurer and send it directly via overnight mail, in many cases, employers will only send the roll-over check to the employee's home address. If you are faced with the latter situation, request that the check be sent to you overnight so that it can be forwarded to the insurer as soon as possible.
Q. The lump sum pension distribution check I received from my employer is made out to me rather than to the insurance company. Will I still be able to avoid taxation on the distribution?
A. YES. To avoid taxation on your distribution, you will need to roll over the funds into a 401(k) annuity within 60 days. If your distribution is not settled into an annuity within this time period, you will owe taxes on the distribution. To expedite this process, check with your insurance company to see if it is one of the many that will accept a check made out to you but endorsed to it.
Q. I am under age 59 1/2. What tax penalties will apply to me?
A. If you are thinking of making withdrawals from your IRA or 401(k) but you are not yet age 59 1/2 you can avoid the 10% federal penalty tax by transferring your IRA or 401(k) into an immediate annuity with a "life contingent" payment option. If you receive the income periodically over your lifetime you may avoid the 10% penalty tax on the money you receive. Remember that you must choose an annuity which will pay out over the course of your (or your and your spouse's) lifetime(s) and not an annuity which only makes payments for a limited certain or specified number of years. Another course of action is to withdraw amounts which do not exceed the IRS 72t or 72q rule levels.
Do you provide assistance with IRA or 401k rollovers?
ABSOLUTELY! Since 1983, Hersh Stern, the principal of ImmediateAnnuities.com, has helped thousands of 401(k) and IRA holders roll over their lump sum pension payments to an annuity, without the need to pay taxes. This is a simple process with the right help, and we are here to answer your questions concerning rollovers and other options with expert advice. Call our customer care department toll-free at 800-872-6684 and we would be glad to help you.
IMPORTANT DISCLAIMER: This information is not intended to provide legal or tax advice. Before making any decisions related to the rollover of a qualified account into an annuity you are strongly advised to consult with proper legal or tax professionals to determine the tax consequences in your financial situation.