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IRAS-ROTH

Traditional IRA-ROTH
Retirement Plan Transfers
Qualified & Non-Qualified

Qualified funds are funded with pre-tax money, while non-qualified funds are funded with after-tax money. Qualified funds are eligible for tax breaks and government regulation, while non-qualified funds are not.

Qualified funds

  • Tax treatment: Withdrawals are taxed as ordinary income
  • Benefits: Tax-deferral and guarantees
  • Examples: Traditional 401(k)s, traditional IRAs, and traditional 403(b)s
  • Rules: IRS limits on annual contributions, withdrawal age, and types of investments

Examples of defined contribution plans include 401(k) plans, 403(b) plans TSP Thrift Savings Plan, 457 Plans, SEP, employee stock ownership plans, and profit-sharing plans. A Simplified Employee Pension Plan (SEP) is a relatively uncomplicated retirement savings vehicle.

You can move retirement funds from a 401(k), IRA, or other retirement account into an annuity. This is called a rollover. 

How to roll over a retirement plan to an annuity

  • Choose an annuity: Research and compare annuity companies, fees, and stability.
  • Contact your plan administrator: Provide information about the annuity and request the rollover.
  • Complete the necessary paperwork: This may include authorizing the transfer.
  • Instruct your plan administrator to execute the rollover: This can be done directly or indirectly.

When to roll over a retirement plan to an annuity

  • Direct rollover This is the preferred method because it's usually tax-free and avoids mandatory withholding.
  • Indirect rollover This method involves moving funds from your retirement account to your bank, then to the annuity company.
  • 60-day rollover This method involves depositing a distribution from your retirement account into an annuity within 60 days.

Risks and considerations 

  • You may lose part of your investment if you die early.
  • A delayed rollover could cost you in taxes.
  • You may need to pay fees.

You can consult a financial advisor to help you choose an annuity and oversee the rollover. With a direct rollover , your employer sends your retirement funds directly to an annuity IRA. This is typically the most straightforward approach. Generally, your employer and financial institution will do most of the work for you; you’ll just need to sign authorization paperwork.

ROTH IRA

When you buy an annuity using a Roth IRA transfer, your withdrawals will be income tax free. As you enter retirement, you can roll any Roth accounts (whether they are Roth IRAs or Roth 401(k)s) into a Roth IRA annuity.

TRADITIONAL IRA

A traditional IRA annuity is a contract between an individual and an insurance company that allows the individual to invest their IRA funds in an annuity. It’s a way to generate income in retirement and diversify an investment portfolio. 

How it works

  • The individual makes regular payments to the insurance company. 
  • The insurance company agrees to pay the individual or their IRA for a set period or the rest of their life. 
  • The individual can receive the payments as a lump sum or as a series of regular payments. 

Tax benefits

  • Contributions to a traditional IRA may be tax deductible if the individual meets certain income requirements. 
  • Withdrawals from a traditional IRA are taxed as ordinary income.

Benefits

  • Can provide a steady stream of income in retirement
  • Can be used to supplement other retirement income, such as Social Security
  • Can offer guaranteed income