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Should I transfer 401(k) funds into an annuity?

At age 60, is it wise to transfer $70,000 worth of 401(k) funds into an annuity? I would do this in order to retire at 62 and use the funds for medical insurance premiums. I also have a $250,000 annuity, long term care policy.

401(k), Annuities, Peri-Retirement
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April 2017

Chamberlain, Michael

Sacramento Santa Cruz Silicon Valley Davis, CA


Good question. It is one that should be asked more often.

The old saying is that Annuities are sold not bought. The reason that they are often sold is due to the commissions that the salesman generate, which can be over 6%.

Keep in mind, there are different types of annuities such as a fixed, variable, and indexed annuities. Each have different selling points. Since you mentioned the purpose would be to pay for medical premiums, I am guessing that you are thinking of a fixed annuity.

I would not recommend a fixed annuity, which has a fixed pay out each month, quarter, or year to pay for insurance that will have rising premiums. Lets say that your health premium is $800 a month the first year, but next year is $1,000, and the following year is $1,000. If you do not have access to additional dollars, you will not be able to afford to pay the rising premiums.

Without more info, I can not be more specific, but in general, NO I would not covert $70,000 to an annuity.


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