Why Would You Want to Rollover a Pension Annuity to a New Annuity?

Shawn Plummer

CEO, The Annuity Expert

In the unpredictable world of finance, finding a steadfast way to secure your future may seem daunting. Fortunately, managing your pension annuity – your hard-earned nest egg – can provide stability. Today, we’ll discuss a vital strategy you might consider: Why to rollover a pension annuity to a new annuity? But why would you want to do that? Let’s find out together.

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Optimizing Returns: Making the Most of Your Investment

Rolling over your pension annuity to a new one may provide an opportunity to obtain better interest rates or investment returns. This could ultimately mean more money for you in the long run. Annuities differ in rates, so a thorough comparison can reveal a more lucrative opportunity.

Example: Imagine if your current annuity earns an interest rate of 2% annually, and you find another annuity offering a rate of 3%. Over time, this 1% difference can significantly amplify your earnings.

Why To Rollover A Pension Annuity

Enhanced Flexibility: Customizing Your Future

A rollover to a new annuity allows for personalization and flexibility to match your current financial situation or goals better. For example, perhaps your needs have evolved since you started your pension annuity, and a new plan may better suit your circumstances.

Example: A change in your health may necessitate a new annuity with a shorter accumulation period or one that allows for earlier withdrawals without penalty.

Risk Management: The Need for Diversification

Spreading your investment across various annuities, also known as diversification, can minimize the risks of having all your money in one place. In addition, it’s a smart move to protect your retirement funds.

Example: Suppose one annuity is tied to the stock market’s performance, and another is a fixed annuity guaranteeing a minimum rate of return. Here, diversification ensures that not all your funds are exposed to stock market volatility.

Why To Rollover A Pension Annuity

Improved Features: Taking Advantage of the Latest Offers

Over time, new annuity products come to the market with enhanced features and benefits. Rolling over your pension annuity might grant you access to these new, possibly more advantageous opportunities.

Example: Some new annuities may offer features like long-term care riders, allowing you to receive benefits if you require long-term care services.

Guaranteeing Lifetime Income: The Added Advantage of Annuity Riders

When you think of financial security in retirement, a guaranteed lifetime income may be on your list. Choosing an annuity with a guaranteed lifetime income rider is often more favorable than annuitizing the pension.

A lifetime income rider allows you to enjoy a steady stream of income for life while still maintaining control over your retirement assets. In addition, it allows you to access your money in emergencies, unlike annuitizing your pension, where the control is usually handed over to the insurance company.

Example: Let’s assume you decide to annuitize your pension. Once the contract is executed, you receive a fixed income for life, but the principal becomes inaccessible. On the other hand, if you choose an annuity with a lifetime income rider, you can still receive lifelong income while retaining the ability to withdraw a portion of the principal amount if needed – a benefit that could prove invaluable in unexpected circumstances.

Rollover A Pension Annuity

Next Steps

The decision to roll over a pension annuity should not be taken lightly. It requires careful consideration of your financial situation, long-term goals, and the potential benefits and drawbacks of the new annuity. However, with proper planning, a rollover could present an opportunity to optimize returns, enjoy greater flexibility, manage risks, and access improved features. Ultimately, it’s about securing your future to suit your needs best.

Why To Rollover A Pension Annuity

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Frequently Asked Questions

Can you rollover an annuity without penalty?

Yes, it is possible to roll over an annuity without penalty. Generally speaking, you can transfer the funds from one annuity to another without incurring any taxes or penalties. However, there are specific scenarios in which a tax or penalty may be imposed, so it’s essential to carefully consider your options and consult with a financial advisor before making any decisions.

What is the difference between an annuity rollover and a transfer?

An annuity rollover involves transferring the funds from an existing contract to a new one. On the other hand, a transfer involves transferring funds from one financial institution to another. An annuity rollover typically occurs when the owner wants to change providers or take advantage of better terms. A transfer occurs when the owner wants to move funds from one account to another, such as from a 401k or IRA to an annuity. Both annuity rollovers and transfers allow the owner of the funds to maintain their tax-deferred status, meaning that taxes are not due until the funds are withdrawn.

Can you rollover an annuity tax-free?

The answer to this question depends on the type of annuity you hold. Generally speaking, most annuities are not eligible for tax-free rollovers. However, some types of annuities may be eligible for tax-free rollover transfers.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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