My 74-Year-Old Dad Has $800K In His 401(k), And My Brother Keeps Telling Him to Move It Into An Annuity. Is This A Smart Move?

Core Insights - The article discusses the complexities and considerations of rolling over a 401(k) into an annuity, particularly for retirees in their 70s [2][4]. Group 1: Annuity Overview - A direct rollover allows individuals to transfer funds from a 401(k) to an IRA annuity without incurring taxes or penalties, which is often recommended for retirees seeking predictable income [3]. - Annuities provide guaranteed income, reducing exposure to stock market volatility, and allow for tax deferral until withdrawals begin [7]. Group 2: Financial Implications - If a retiree rolls over $800,000 into a fixed immediate annuity, they could receive approximately $4,000 to $5,000 monthly, depending on rates and contract terms, with current payout rates around 5% to 6% [5]. - However, unless the annuity includes inflation protection, the fixed payments may lose purchasing power over time, potentially affecting long-term financial stability [6]. Group 3: Considerations and Drawbacks - While annuities offer stability and peace of mind, they come with high fees and surrender charges that can diminish overall value, making them less appealing for some investors [9].