Comments on: 401k into an annuity or IRA – Ask the M-Network http://www.gatherlittlebylittle.com/2009/04/401k-into-an-annuity-or-ira-ask-the-m-network/ Proverbs 13:11 - "...he who gathers money little by little makes it grow." Sat, 21 Nov 2009 03:27:42 -0400 hourly 1 By: My Journey http://www.gatherlittlebylittle.com/2009/04/401k-into-an-annuity-or-ira-ask-the-m-network/comment-page-1/#comment-9569 My Journey Sun, 12 Apr 2009 16:29:39 +0000 http://www.gatherlittlebylittle.com/?p=1504#comment-9569 @Frugal, I think the person asking the question meant "I have a 401(k), AND I am going to roll it out of there." My point about the annuity was that sometimes people use the investment vehicle for benefits OTHER than tax deferral; including but not limited to a floor to losses & Guaranteed income regardless of your account value. @Frugal,

I think the person asking the question meant “I have a 401(k), AND I am going to roll it out of there.”

My point about the annuity was that sometimes people use the investment vehicle for benefits OTHER than tax deferral; including but not limited to a floor to losses & Guaranteed income regardless of your account value.

]]> By: frugalscholar http://www.gatherlittlebylittle.com/2009/04/401k-into-an-annuity-or-ira-ask-the-m-network/comment-page-1/#comment-9567 frugalscholar Sun, 12 Apr 2009 15:32:24 +0000 http://www.gatherlittlebylittle.com/?p=1504#comment-9567 I may be missing something here--but a 401k is by definition tax-deferred. Hence, you don't need an IRA, which also offers tax deferral. Ditto, I think, for the variable annuity. That offers tax deferral, but, as with the IRA, there is no need to get that kind of account within an account that is ALREADY and by definition tax deferred. I am a teacher, so I may be missing something here. I have a 401k at work. My IRAs--both regular and Roth--are in accounts separate from the 401k. I may be missing something here–but a 401k is by definition tax-deferred. Hence, you don’t need an IRA, which also offers tax deferral. Ditto, I think, for the variable annuity. That offers tax deferral, but, as with the IRA, there is no need to get that kind of account within an account that is ALREADY and by definition tax deferred.

I am a teacher, so I may be missing something here. I have a 401k at work. My IRAs–both regular and Roth–are in accounts separate from the 401k.

]]> By: * Weekly Highlights: April 12, 2009 http://www.gatherlittlebylittle.com/2009/04/401k-into-an-annuity-or-ira-ask-the-m-network/comment-page-1/#comment-9566 * Weekly Highlights: April 12, 2009 Sun, 12 Apr 2009 14:25:33 +0000 http://www.gatherlittlebylittle.com/?p=1504#comment-9566 [...] Capitalist and Million Dollar Journey who created and launched the Canadian Money Forum recently.Should you rollover your 401k into an annuity or IRA? at Gather Little By Little — This is an Ask The M-Network question that tackles a common [...] [...] Capitalist and Million Dollar Journey who created and launched the Canadian Money Forum recently.Should you rollover your 401k into an annuity or IRA? at Gather Little By Little — This is an Ask The M-Network question that tackles a common [...]

]]> By: MyJourney http://www.gatherlittlebylittle.com/2009/04/401k-into-an-annuity-or-ira-ask-the-m-network/comment-page-1/#comment-9568 MyJourney Wed, 08 Apr 2009 18:15:43 +0000 http://www.gatherlittlebylittle.com/?p=1504#comment-9568 Wow very complete answer, but I feel the answer is premature insofar as you are missing information. However, first thing is first, there is nothing stopping this person from rolling into a 401(k) and then purchasing a partial annuity. The information that is missing is the person's age and risk tolerance. If the "question asker" is 50 and can't stomach the ups and downs of the market for both emotional and monetary reasons, the annuity is not such a horrible option. I say 50, because most annuities have a 5 to 8 year span of surrender charges. Further, many annuities (although most companies are starting to limit the rider) allow for a guaranteed income regardless of what the account does. So if we have a particular person that can't stand the market's swings and NEEDS guaranteed income - the question should be - why is the annuity a bad call? TIPs are a great vehicle now, because inflation is high, but lets fast forward 10 years and inflation is under control at 1% and you are getting lets call it 2.5% on your TIPs investment for a grand total of 3.5% rather than the annuity which had been growing at 5 to 7% guaranteed (granted that guarantee is only based on the insurance company underwriting the product). You can check out the example of when withdrawals can screw you up - http://www.myjourneytomillions.com/articles/an-investment-average-of-10-wont-guarantee-success/ Just some alternative thoughts from a lowly reader! Wow very complete answer, but I feel the answer is premature insofar as you are missing information. However, first thing is first, there is nothing stopping this person from rolling into a 401(k) and then purchasing a partial annuity.

The information that is missing is the person’s age and risk tolerance. If the “question asker” is 50 and can’t stomach the ups and downs of the market for both emotional and monetary reasons, the annuity is not such a horrible option. I say 50, because most annuities have a 5 to 8 year span of surrender charges.

Further, many annuities (although most companies are starting to limit the rider) allow for a guaranteed income regardless of what the account does. So if we have a particular person that can’t stand the market’s swings and NEEDS guaranteed income – the question should be – why is the annuity a bad call?

TIPs are a great vehicle now, because inflation is high, but lets fast forward 10 years and inflation is under control at 1% and you are getting lets call it 2.5% on your TIPs investment for a grand total of 3.5% rather than the annuity which had been growing at 5 to 7% guaranteed (granted that guarantee is only based on the insurance company underwriting the product).

You can check out the example of when withdrawals can screw you up – http://www.myjourneytomillions.com/articles/an-investment-average-of-10-wont-guarantee-success/

Just some alternative thoughts from a lowly reader!

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