Converting your individual retirement account (IRA) into an annuity can be an excellent way of supplying yourself with a steady income stream for the rest of your life. That doesn’t mean it’s for everyone, though. Here’s two pros and two cons of converting your IRA into an annuity.
Pro #1: You don’t have to be proactive with annuities. The nice thing about annuities are, once they’re set up, all you really have to do is collect the check that comes your way each month. Worrying about returns and rebalances are no more with an annuity.
Pro #2: Annuities give you a reliable income source. Does thinking about running out of money in retirement make you queasy? With an annuity, you never have to worry about that if you stretch your annuity out over the rest of your life. The regular cash flow can make retirement more predictable, and that’s important.
Con #1: You may not get to use all your funds. Once an IRA is converted to an annuity, it’s generally very difficult to pull the lump sum back out all at once. It’s also worth noting that if you don’t reach you anticipated life expectancy, then some of the money you invested in your annuity may go to waste.
Con #2: There are fees involved. Because annuities are a passive approach to retirement, that means there are generally fees involved for that added convenience. Annual fees associated with managing an annuity are common, and commission fees can be expected when converting an IRA into an annuity.1
Still not sure? We’re here for you. If you’re interested in learning more about converting your IRA into an annuity, call us and we can give you the information you’ll need to make the right decision for you.
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[1] https://smartasset.com/retirement/converting-an-ira-to-an-annuity