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Near Retirement? An Idea For Your IRA

Updated: Feb 1, 2023

Did you know that for many folks nearing retirement age, the two biggest assets they own are their house and their retirement (usually an IRA)? The house is insured, but the IRA is not.

In these turbulent times of the stock market going up…up…up. Somebody once said, “What goes up, must come down.” Does that possibility keep you lying in bed at night with your eyes wide open?

Well, I’ve been told I’m actually a “sleep expert” and here is an idea that might help you sleep better.

It is called, “Rolling an IRA into an Annuity.”

Basically, when you reach that magic “required minimum distribution” age (currently 72), you must pull a certain dollar amount out of your IRA every year, regardless of the market. You could end up having to take money out at a time that the market has dropped, which is like taking out a larger amount in the long run. An Annuity on the other hand provides something like “insurance” on your retirement investment. How? By providing protection in a down stock market, guaranteed lifetime income, and the ability to guarantee a certain amount is passed on to your heirs.

My favorite choice of an annuity is a “variable annuity.” That gives some protection against inflation and rising interest rates. (Usually some higher fees associated, but I think it’s worth it.) Other professionals prefer “fixed annuities” because they are more reliable as far as an income stream.

Basically, rolling an IRA into an annuity is a tax-free process. Annuities that are funded with an IRA roll-over are “qualified” plans. This enables insurance companies to create “IRA annuities” into which an investor can directly deposit their retirement funds. Even better, the funds within the annuity will continue to grow tax deferred.

A good strategy is to delay payments from the annuity for as long as possible. The smaller the number of years an annuity is paid out over, the larger the monthly amount that is paid. Remember, this is still technically an IRA, which means you are still subject to the IRS Required Minimum Distribution rules. So, you cannot delay getting payments once you turn 72.

Who does these kinds of “IRA annuities?” Just about every major Life Insurance company.

One downside to taking this option. It is irreversible. By rolling your IRA funds into an immediate annuity, you are giving up access to the principal in return for guaranteed income. MAKE SURE you want to do this before doing it. Always consult with a trusted and knowledgeable advisor before doing anything like this.

Did you hear? Prov 28:26 says, “One who trusts in himself is a fool; but one who walks in wisdom is kept safe.” Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at Also on Facebook

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