Beyond Pensions: Annuity Rollovers vs. Traditional Pension Plans

Pension plans and 403(b)s typically use annuities as their preferred underlying investment. So, why consider a pension rollover to a different annuity? Here are some limitations and downsides typical of pension plan and 403(b) annuities which a rollover can overcome.

• Opting for a Higher-Interest Fixed Annuity Plan: In your retirement planning, you’ll notice that the interest from a typical pension annuity can be quite low. We can shop around to find top-rated Fixed Annuity providers for you. These providers offer higher guaranteed interest rates, resulting in increased income during your retirement. In terms of retirement planning, this option is suitable for conservative investors who seek a guaranteed interest rate and reliable income, surpassing their current pension offers. Since pensions and 403(b)s typically invest in fixed annuities, making such a switch would be a parallel move, potentially offering you a higher income and greater control over your funds.   
• The Advantages of Index Annuities in Your Retirement Plan: Pensions and 403(b)s typically offer you limited control over your investment choices. If you’re seeking more control and the potential for higher interest rates, consider rolling your existing pension or 403(b) into an index annuity. Historically, index annuities have provided higher interest rates than traditional pension plans because the funds are allocated to indices such as the S&P 500. However, unlike 401(k)s and mutual funds, index annuities protect against market losses. You will never incur a negative return with an index annuity. More detailed information on index annuities can be found below. For a deeper understanding of index annuities, feel free to Contact Us or visit our detailed Index Annuities page.
• Why Choose Hybrid Annuities: Consider a pension rollover into a hybrid annuity from your existing pension or 403(b). As the name suggests, hybrid annuities combine features of both fixed and index annuities. Like a fixed annuity, hybrid annuities guarantee an income stream for specified durations, such as 5, 10, or 20 years. They can also be structured to ensure a lifetime income that neither you nor your spouse will outlive. Hybrid annuities resemble index annuities in that your funds are invested in indices such as the S&P 500. Like pension plans, hybrid annuities give you the peace of mind of knowing you have a guaranteed retirement income you can rely on. This income can increase based on the performance of the indices your funds are allocated to, but it will never decrease throughout your retirement. Each income increase sets a new baseline that is guaranteed never to drop, but that can increase further based on the performance of the indices you are allocated to.
• Ensuring Your Loved Ones with Annuity Death Benefit: Typically, the disbursement of pension income stops upon the death of the pensioner or his/her spouse, if applicable. However, certain annuity plans we work with distribute any undisbursed balance to the pensioner’s beneficiaries. This means that instead of the pension company retaining any leftover funds, your loved ones would receive a death benefit. For pensioners who pass away prematurely, this can represent a significant amount.
• Keeping Up with Inflation: When you retire, pension income is typically set as a fixed amount that remains unchanged throughout your retirement. However, there are ways to potentially increase this income. You can opt for index annuities, which link your funds to indices like the S&P 500 while ensuring protection against market losses. Another option is using a fixed annuity inflation Rider that links your income stream to inflation, allowing for annual increases.
• Gain Financial Flexibility in Retirement with a Pension Rollover: In the realm of retirement planning, a pension plan essentially serves as a fund for your savings—it’s your future. However, the majority of pension plans don’t offer the flexibility of management you might experience with personal funds, especially regarding income distribution. Once you decide to initiate the income flow, you’re typically not permitted to withdraw extra funds in emergencies or for other unexpected needs. We work with highly rated annuities, which not only guarantee a lifetime income but also provide the flexibility to access additional funds as and when needed.
• Annuity Riders: Many annuities we work with have optional features that can be tailored to meet your specific needs. These optional rider choices include long-term care, inflation protection, enhanced income, death benefit, and more. For more information on the different types of Riders, please Contact Us to speak with an annuity specialist, or visit our Annuity Riders blog.

Why an Index Annuity Rollover Could Be the Key to Maximizing Your Retirement Savings

Index annuities, also known as fixed index annuities or equity-index annuities, are a type of fixed annuity. They offer the potential for higher returns based on the performance of market indices, such as the S&P 500, Dow Jones Industrial Average. With index annuities, your account value can increase with the positive performance of the underlying index while being fully protected from market losses.

The Advantages of Index Annuities

• Growth Potential: Index annuities provide the opportunity to earn returns higher than traditional fixed annuities because they are linked to the performance of market indices such as the S&P 500 or Nasdaq 100. When the indices to which you are allocated perform well, your account receives interest tied to those indices. However, you are fully shielded from market losses.  
• Protection from Market Losses: With an index annuity, both your initial investment and any interest earned in prior periods are fully shielded from market losses, ensuring peace of mind and financial security. If the indices have negative performance, your interest will be zero.
• Flexibility and Customization: Index annuities can be tailored to meet your unique financial needs and goals. They offer various options for income payments, death benefits, and riders to enhance your annuity contract. These riders can include enhanced income, a larger death benefit, long-term care, inflation protection, among others.
• Tax-deferred Growth: Just like your pension and 403(b), earnings within an index annuity are tax-deferred. This allows your investment to compound over time without incurring taxes until you withdraw the funds in retirement. Because the IRS doesn’t limit annuity contributions, you can also roll over non-tax-advantaged savings to an annuity to benefit from tax deferral. For more information on rolling over your CDs, Mutual Funds, and Savings geared for retirement to an annuity, please click on the provided link or Contact Us to speak with an annuity specialist.

Hybrid Annuities: Combining Stability and Growth Potential in Your Retirement Savings

Another choice is hybrid annuities. As the name suggests, hybrid annuities are a blend of fixed and index annuities. They can provide you with a guaranteed income stream, with the possibility for that income to increase throughout retirement based on the performance of the indices.

• Secure Income Stream: Hybrid annuities, like fixed annuities, can be set up to provide a secure income stream for a specified time span, such as 5, 10 or 20 years.
• Guaranteed Lifetime Income: They can also be set up to guarantee a lifetime income stream that neither you nor your spouse can outlive.
• Market-Linked Growth: Hybrid annuities offer a rate of return that is tied to a specific market index, such as the S&P 500. If the index performs well, your account is credited with interest corresponding to that performance.
• Principal Protection: Like fixed and index annuities, hybrid annuities are fully protected from market downturns and will never experience negative returns.
• Income Can Increase Throughout Retirement: The income can increase based on the indices’ performance, but it won’t decrease. Any income rise sets a new guaranteed baseline, which can still grow if the indices perform well. An analogy would be like a staircase. Once you establish a new level of income that level is guaranteed, with the potential for that level to increase which would establish a new baseline.
• Peace of Mind:  Hybrid annuities ensure a guaranteed income throughout your retirement, offering peace of mind. This income has the potential to increase to keep up with inflation, but it will never decrease.

Start Your Journey to a Secure Retirement with Trusted Solutions from Annuity Emporium

Why settle for just one or two options when you can choose from dozens of the best? At Annuity Emporium, we aren’t restricted to a single insurance company. We offer you a carefully-chosen range of highly-rated fixed, index, and hybrid annuities from industry-leading providers—each tailored to meet your unique retirement goals.

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