You Can Now Use Annuities In Your Retirement Plan

The “secure act” passed last year now allows for the use of annuities in retirement plans. Here are just some of the highlights of the secure act:

  • The SECURE Act became law on Dec. 20, 2019.

  • The SECURE Act will make it easier for small business owners to set up “safe harbor” retirement plans that are less expensive and easier to administer.

  • Many part-time workers will be eligible to participate in an employer retirement plan.

  • The Act pushes back the age at which retirement plan participants need to take required minimum distributions (RMDs), from 70½ to 72, and allows traditional IRA owners to keep making contributions indefinitely.

  • The Act mandates that most non-spouses inheriting IRAs take distributions that end up emptying the account in 10 years.

  • The Act allows 401(k) plans to offer annuities.

Your 401K plan may not offer any annuities at this time and could lead to a missed opportunity for you.

What does this mean for you if you’re retiring in the next few years? 

Possible missed opportunities. Right now, you may not have the opportunity to select an annuity as a choice for any of your retirement funds in your 401(k), ROTH or qualifying deferred compensation plans.


Why would I want to consider using all or part of my 401K to buy an annuity?

Annuities have the ability, depending upon features and the type of annuity you buy, to offer you guarantees as to the safety of your investment. Annuities can also create a guaranteed stream of income using optional riders without losing ownership and control of your funds during the accumulation or distribution years. Many of these options will also allow your spouse to receive a joint income option that would continue the same dollar amount of income even after your death with any remaining funds could then be passed forward to your selected secondary beneficiaries.

What Types of Annuities Are Available To Me?

You can purchase a fixed interest rate annuity, Index annuity, variable annuity or an immediate annuity with your retirement funds or after tax dollars.

Annuities are designed to meet a variety of financial needs that may require tax deferred growth, income needs to cover expenses now or take later in life, for estate planning, wealth transfers or even philanthropic reasons to see that money goes to their favorite charities after they are gone. Annuities are also useful if you have a sick or disabled loved one you want to see is taken care financially after you are gone.

Every one’s needs may be different, creating a retirement plan and income strategy should be taken seriously and we suggest that you seek professional advice. Often people do not seek advice because they are worried that financial advisors may charge high fees for their time. 

Understanding How Financial Advisors are Paid is Important

Fees for financial planning are not always charged by advisors. Many will provide their services free to you and would then be paid a commission from any product you may purchase. They are still obligated under the Best Interests Rule to place your needs ahead of their own. This “The Best Interest Rule” was recently passed and will take affect this summer of 2020.

We suggest that you ask your advisor how they are paid, what commissions they may receive, what their planning fees are and if there are any ongoing fees they may charge you monthly for oversight or management.

Outside Advice

When moving money to tax qualified investments outside of your retirement plan you can choose a financial advisor that works only for you, understands your individual goals, needs and may take on the capacity of a fiduciary overseeing your investments in your best interests. Often your employer’s retirement plan counselor is limited to offering any investing or investment advice leaving you with the job of doing it yourself and you may not be comfortable with that option.

Movement of money strategy

401K and retirement plans available to employees are typically long term and dollar cost averaging growth investing. Once you retire your strategy will need to change form growth to income. To make this change in one movement of money at one time is not always the best choice. Having an outside plan now, while you are still working, will allow you the opportunity to slowly transfer your growth strategy into an income strategy so by the time you do retire you can ease into a stream of income that may better meet your needs.

It’s Easy To Move Your Money From Your Plan

Provided you are 59 ½ or older you may be allowed an in-service retirement funds transfer.  This will allow you to transfer all or a portion of your retirement plan funds to a outside retirement plan self directed IRA allowing you to take advantage of selecting an annuity or other alternative investments for your funds today. Many plans offer the ability to phone in your request to transfer money to a new custodian for a tax qualified or IRA account. Sometimes it’s simple paperwork and your financial advisor is familiar with each of the process and will walk you through them.

You can learn more about the types of annuities that are available by visiting the annuity selection tab on our website.

How To Get Started

Getting started is easy. Just fill out our short form to start the process and be on your way to a stable financial future.

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