IRAs, or individual retirement accounts, and annuities are similar retirement investment options that offer a range of features based on your savings objectives, current financial situation and payout preferences. These retirement vehicles differ in payout format and investment options. Annuities are offered by insurance companies and guarantee payments during retirement without a funds transfer after your death. IRA payouts are based on manual withdrawals from capital and investment earnings during retirement, and remaining funds are distributed to beneficiaries after your death. You can move funds from an IRA to an annuity through a rollover or through IRA liquidation and annuity reinvestment.
Step 1
Discuss changes to your long-term financial plan with a trusted financial adviser. Migrating funds between investment accounts can result in tax payments and penalties, so you need to understand all the benefits and likely consequences of your transfer. The Securities and Exchange Commission states that most individuals should maximize IRA investments before purchasing variable annuity options.
Step 2
Review your annuity options. Annuities can differ in payout period and payout amount and may offer funds to your spouse after your death. Variable annuities allow you select investment options from a range of mutual funds, with the payments reflecting the growth or decline of your selected investments. Fixed annuities provide a guaranteed minimum interest rate on your invested funds and can pay for a designated period, until you pass away or until both you and your spouse die.
Step 3
Contact your IRA plan administrator for an IRA rollover. Rollovers from an IRA to an annuity are allowed only for 403b tax-sheltered annuities. These plans are available only to public school employees, nonprofit organization employees and clergy. To avoid a withholding of up to 20 percent for potential taxes and fees, specify that the funds from your IRA be sent directly to your new annuity You should not incur penalties or fees for a rollover to a 403b from an IRA.
Step 4
Review your IRA liquidation requirements. If you're younger than 59 1/2, you'll generally have to pay a penalty for early withdrawal to place funds into a standard annuity. Exceptions to early withdrawal penalties do not apply since the funds will be directed toward an investment rather than covering medical expenses, higher education fees or a first-time home purchase.
Step 5
Withdraw funds from your IRA by filling out forms required by your plan administrator. Calculate your anticipated tax obligation from the withdrawal, including any penalties. Retain sufficient funds from your withdrawal to cover taxes, then invest the remaining IRA funds in your selected annuity. Sign all contracts, and keep copies in a secure location.
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