July 27, 2020

When you leave your employer, you also discontinue contributing to your 401(k) or receiving your employer’s match. You may be going on to another employer or possibly retiring. Either way, you may want to consider a fixed-indexed annuity when rolling over your 401(k) to avoid the following:

  • Your employer pays part of the plan administrator fee for you while employed but is not required to once you leave. Check with your HR department to determine if your plan administration fees will increase if you leave your 401(k) in the employer’s plan.
  • Having your 401(k) cashed out and a check mailed to you if under $1000 in value or rolled into an IRA if under $5000 without your choice of custodian if you fail to roll it out within the set timeline of your plan’s bylaws. Contact your HR Department to ensure you understand their requirements and your options since not all employers allow you to leave your 401(k).

Consider a Fixed-Indexed Annuity

Many people decide to roll over their 401(k) to an IRA, but there are many reasons you should consider rolling it over to a Fixed-Indexed annuity instead. Fixed-Indexed annuities are becoming more widely used in financial services and are contracts with an insurance company. Some features of fixed-indexed annuities include:

  • Your principal is protected during a down market. You will not lose your initial principal or accumulation despite market conditions.
  • Grow on a tax-deferred basis.
  • The return bases on an index (ex. The S&P 500), which grows the annuity’s value over time.
  • Fixed-Indexed Annuities provide a guaranteed lifetime income and protection against longevity risk and you receive annuity payments for life.

Tips to Ensure a Smooth Transition

If you decide to roll over your 401(k), take note of these tips. They can help ensure a smooth transition of your retirement account’s assets:

  1. Check with the custodian of your retirement account to ensure a rollover is possible due to the time the account has been open, associated transfer fees, and if you can move out of the plan while still employed.
  2. Ask for all transfer out paperwork from the custodian (fund company) and if additional signatures or a ‘signature medallion stamp’ will be required on the paperwork to complete the transfer.
  3. Include a statement from the account that includes your name and address, the account number(s), and is less than six months old.
  4. Realize that you have options of where you transfer this account to and the type of annuity.  Discuss your options with your insurance representative.
  5. Understand the fees associated with transferring your money to an annuity. Your financial professional will explain these fees to you during the rollover meeting as you review the paperwork.
  6. Be patient. Some fund custodians process transfers very slowly.  Ask your financial professional to keep in touch with you regarding the progress of the transfer.  If you are unsure that the transfer has completed in a month, check-in with them.

Fixed Benefit of an Annuity

Lastly, determine if you would like to consider a fixed-indexed annuity is a suitable option for you. An annuity provides a fixed benefit for a specified period. It can be a retirement income strategy based on your portfolio’s other investments.

If you have questions regarding annuities please contact our office. We can show you how they can be a part of your retirement income strategy.


Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. This is not a comprehensive review of all the features and benefits. All the material details of annuities should be reviewed prior to making a purchase decision. Although an external index or indexes may affect contract values, the contract does not directly participate in any stock or equity investments. An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59 ½, may be subject to a 10% federal tax penalty. If the annuity will fund and IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Consult a tax advisor for specific information.

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In addition Pathway To Retire specializes in providing strategies and guidance for those who are seeking a better lifestyle in retirement. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

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