There is a catch though. You can only move the funds between similar accounts. You can’t move your savings from a non-qualified annuity to a qualified annuity, for example. Money in a variable rate annuity can’t move to a fixed rate annuity. Your retirement savings can only leave a fund that’s performing poorly or has high fees into a similar fund that should give you better returns.
You might also have to pay surrender charges. They can be quite steep, especially in the first years of an annuity. They often start around 8 percent then fall during each year of the annuity. So you could buy an immediate, fixed-rate annuity for $100,000 then find that you needed to take the money back after a year. The surrender charges could cost as much $8,000—more than the annuity would have given you over the course of that year.
The Good News
The good news is that if you’re moving funds within the same insurance company, the company will often waive the surrender fee. It’s another issue that you need to check, though, before you make your decision.
- The Four Stages of Retirement
- When Can You Retire?
- How Much Will You Need to Save Before You Can Retire?
- How to Create a Retirement Savings Habit
- The Benefits and Costs of a Pension
- Retiring with a 401(k)
- The Benefits of a 401(k) Plan
- The Costs of a 401(k) Plan
- Vesting a 401(k) Plan
- 4 Types of 401(k)
- Rolling Over Your 401k
- Leave Your Old 401(k) with Your Old Employer
- How to Rollover Your 401(k)
- Individual Retirement Accounts—IRAs
- How an IRA Works
- Working Your IRA With Your 401(k)
- 3 Types of IRAs
- SEP IRA Limits
- The Benefits of an Annuity
- Deferred Annuities
- Immediate Payment Annuities
- Fixed Index Annuities and Variable Rate Annuities
- Qualified and Non-Qualified Annuities
- Changing Your Annuity—The Section 1035 Exchange
- The Limits of a 1035 Exchange
- How to Plan for Your Retirement
- How to Start Planning Your Retirement