company separated creating 2 new. 401k plan was with original company and can be rolled to new. but would prefer to take 401k and put into an annuity. employee job function did not change.
2007-02-27 02:13:06 · 5 answers · asked by V P T 2 in Business & Finance ➔ Investing
The policy is often that you cannot roll your 401(k) while you're still with the company. Your HR or benefits administrator will be able to tell you for certain.
In any case, you are correct that rolling it into a new account is best if allowed. Make sure that if and when you do roll into the annuity, it is set up as an IRA and the money is transferred directly; or the check is made to the gaining company for your benefit and not directly to you. Otherwise, it will be treated as a distribution.
If for some reason the funds are penalized and/or taxed, just ensure that the new account is opened within 60 days. You'll recoup your taxes and penalties upon filing your tax return.
Addendum regarding the previous post: Her sister rolled the funds into a PARTICULAR annuity that did not perform as well as she had hoped. Annuities come in tremendous variety, and can be applied to just about any need. They are unquestionably the best choice for certain situations, and inappropriate for others. Annuities today are extremely complex, and you should contact a qualified advisor to find which, if any, best addresses your needs.
2007-02-27 02:37:47 · answer #1 · answered by Rob D 5 · 0⤊ 0⤋
You'd be better off rolling it into an IRA. Lots of investment options to chose from and you should get a much better return.
But to answer your question, yes, you can go the annuity route. I just don't think you'll earn as much on it. My sister did that after someone advised her to take her retirement (which was actually invested in Fidelity Magellan) and roll it into an annuity. It's been five years since she rolled it. The annuity rate of return pretty much sucks until she reaches somewhere around age 90. She would have been WAY better off if she'd left it alone.
Addendum to Rob's answer - a Qualified financial adviser is the one that told her to go with an annuity. And yes, I am well aware that there are many types of annuities. My problem is, this guy, that supposedly knew what he was doing gave her really bad advice. She would have been way better off if she had left it alone at Fidelity.
Oh Dear - and another addendum to Rob - She DID contact a qualified adviser. As near as I can tell, he made a whole lot of commission selling her an annuity. Her 401K was safely invested in Fidelity, which if it were still there, she would have about $40,000 rather than the current $24,000 it's worth at the moment. This so called qualified adviser is the one that TALKED her into the annuity. The only reason I can come up with is he made a whopping commission on it. Not to mention, she was almost 60 when this idiot talked her into it. It has just now, after 5 years, gotten back to the cash value she invested in the first place.
And I'm glad to see the other people on here, (besides Rob) agree that an annuity is a lousy idea for 401K monies.
2007-02-27 02:33:46 · answer #2 · answered by Faye H 6 · 0⤊ 0⤋
One of the worst things you can do is put a 401K (or IRA) into an annuity. There are many people in the investment community that would like to see this become illegal.
You're taking tax deferred money and paying for it to become tax deferred in an annuity. That's just plain crazy. To add to that, variable annuities are one of the most expensive (fees) investments out there.
You need to do a whole lot of reading. Call Schwab, Fidelity or Vanguard. Even a retail broker like Edward Jones, Merril, etc. would be a better choice (though more costly). Watch out, some brokers prefer higher commisions vs. best investments for their clients, others are just ignorant.
Bottom line: Speak to professionals & read as much as you can.
2007-02-27 03:26:27 · answer #3 · answered by Common Sense 7 · 1⤊ 0⤋
Why an annuity? About the worst thing possible. High expenses internally & externally. Easy enough to create the same flow with no extra expenses by rolling into a brokerage acct. No reason to do this at all. Schwab.com or wherever. Just a horrible decision you will likely regret. Some agent will make his retirement secure off you.
2007-02-27 03:55:31 · answer #4 · answered by vegas_iwish 5 · 1⤊ 0⤋
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2015-02-05 22:22:47 · answer #5 · answered by Anastasia 1 · 0⤊ 0⤋