If you’re wondering whether to roll over a 401(k) into an annuity, you’re not alone. Pre-retirees and retirees often reach a point where the market feels stressful, and they want guaranteed lifetime income they can’t outlive.
The good news: rolling a 401(k), 403(b), TSP, or similar employer plan into an annuity is usually straightforward when it’s done the right way—and it can be done without triggering taxes when it’s a proper rollover.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using our annuity calculator.
What it means to roll over a 401(k) into an annuity
When people say “roll my 401(k) into an annuity,” what they’re really doing is:
- Moving the 401(k) into an IRA (because annuity contracts are held inside an IRA for retirement dollars), then
- Placing an annuity contract inside that IRA to create guarantees (like protected principal, lifetime income options, etc.).
Think of it like moving money from one retirement “bucket” to another retirement “bucket.”
👉 Want help comparing the best annuity options for your rollover? Schedule a call with me.
When a 401(k) to annuity rollover can make sense
This move is often a fit when you want more certainty in retirement, especially if you:
- Want guaranteed income for life to help cover essential expenses
- Are tired of market volatility right before (or during) retirement
- Want a clear plan for “retirement paycheck” money
- Like the idea of contractual guarantees rather than “hope it works out” investing
An annuity can be a powerful tool when used for the right purpose: income and protection, not “chasing returns.”
When it might NOT be the right move
You may want to slow down and evaluate other options if:
- You’ll need a large chunk of the money quickly (liquidity matters)
- Your 401(k) has ultra-low costs and you’re comfortable staying invested
- You don’t actually need more guaranteed income
- You’re rolling everything over without a plan (often the mistake)
A rollover is a strategy—not a default decision.
💡 Pro Tip: Many people do best using an annuity for a portion of retirement assets (to lock in income), while keeping the rest flexible.
How the rollover process actually works (and how to avoid taxes)
There are two common ways this gets done:
1) The “check gets mailed to your house” method (common with 401(k)s)
Many 401(k) providers mail the rollover check to your home. That can feel weird, but it’s normal.
- Ideally, the check is made payable to the new IRA/annuity carrier for your benefit (FBO you).
- Then you forward it using tracked mail (FedEx/USPS with tracking) to get it deposited into your new IRA annuity.
2) Custodian-to-custodian transfer (common with IRAs)
If your money is already in an IRA at Fidelity, Schwab, Vanguard, or a bank, it’s often a clean transfer:
- The annuity carrier sends transfer paperwork
- The current custodian processes it and transfers funds directly
Either way, when it’s structured as a proper rollover/transfer, it’s generally not a taxable event.
👉 Want me to walk you through the cleanest way to do this with your specific provider? Schedule a call.
Roth 401(k) rollovers: how tax-free income can work with annuities
If you have a Roth 401(k), that can roll into a Roth IRA—and then into an annuity held inside the Roth IRA.
Why this can be powerful:
- If your annuity income comes from Roth dollars and distributions are qualified, your income can be tax-free.
Important note: some carriers handle Roth conversions and Roth-related features differently (and some may not support certain conversion workflows inside the contract). This is one reason it’s smart to compare options carefully before you lock anything in.
Example: what income could look like after a rollover
Here’s a simple example I often show:
- Age: 62
- Amount: $100,000
- Goal: income now vs. income later
If income starts immediately, the monthly payout might be lower. If income starts later (say age 67), the income can be meaningfully higher because the income base has time to grow.
And the math scales:
- If $100,000 produces about “X,” then $500,000 is roughly 5X, and $1,000,000 is roughly 10X (exact results depend on age, timing, product, and options).
The main point: a rollover can turn part of a 401(k) into a personal pension-style paycheck.
Conclusion
A lot of people are shown only a narrow set of annuities—often the ones with the highest commissions.
John’s process is built around transparency:
- Showing you what’s available
- Letting you compare options based on what you need
- Using tools/calculators that help you see real numbers, not vague promises
👉 Want to see what’s available for your age, state, and goals? Book a call from the calendar link.