IMPORTANT DISCLAIMER: This information is not intended to provide legal or tax advice. Before making any decisions related to the rollover of a qualified account into an annuity, you are strongly advised to consult with proper legal or tax professionals to determine the tax consequences in your financial plan.

Purchasing an annuity within a retirement plan that provides tax deferral under sections of the Internal Revenue Code results in no additional tax benefit. An annuity should be used to fund a qualified plan based upon the annuity’s features other than tax deferral. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan.

Bonus annuities may include annuitization requirements, longer annuitization or surrender charge periods, higher surrender charges, lower interest rates, lower caps, higher spreads, or other restrictions not included in annuities that don't have a premium bonus feature.

Any distributions are subject to ordinary income tax and, if taken prior to age 59½, a 10% federal additional tax.

• Not FDIC insured • May lose value • No bank or credit union guarantee • Not a deposit • Not insured by any federal government agency or NCUA/NCUSIF • Product and feature availability may vary by state and broker/dealer. Contact Arizona Insurance Exchange at 623-977-3411 to speak with a licensed agent regarding details.

Q: Is it possible to rollover my retirement savings, such as my 401k, 403(b), pension or IRA accounts into an annuity without paying taxes?

A: Yes, you can rollover your IRA, 401(k), 403(b), or lump sum pension payment into an annuity tax-free. Annuities funded with an IRA or 401(k) 403(b), pension or IRA rollover are "qualified" plans, enabling an insurance company to create an "IRA annuity", into which you can deposit your retirement funds directly. Additionally, you can have your employer roll over your 401(k) funds into an annuity without withholding any taxes since no mandatory withholding requirements pertain to funds directly transferred into an annuity by an employer.

Q: If I decide to rollover my IRA, 401(k) 403(b), or lump sum pension payment into an annuity, will I be hit with a distribution tax?

A: NO. The reason you're permitted to roll over these payments into an annuity tax-free is because when you buy an annuity with IRA or 401k money, the first thing the insurance company does is create an IRA holding account to receive your transferred funds. So really, buying an annuity with IRA money is the same as moving your money from its current IRA or 401k trustee to another IRA trustee. This kind of transaction is considered a "direct transfer" or a "direct rollover", which is tax-free. You will owe taxes on the monthly income you receive, but not on the transfer

Q: How can I find and purchase an IRA annuity?

A: Locating and purchasing an IRA or 401k annuity is simple. Review the information and call us (877-468-6584 or 623-977-3411) with all of your questions. We'll help you understand and choose your best option and then complete all of the necessary paperwork. When the insurance company receives your application, it begins the rollover process by sending your signed transfer authorization to your current IRA/401k custodian. After a few days, they will send the premium amount to the insurance company. That completes the transfer and your contract is issued and sent to you. As your agent, we walk you through every step of the process. This services is provided free of charge.

Q: Can I "lock in" an IRA annuity rate before the insurance company receives my distribution?

A: It is possible to get a ‘hold rate’ from many insurance companies. Usually, the quoted rate is maintained for several months (typically one to three), while the cash transfer takes place. "Rate hold" periods typically begin once the insurance company is in receipt of all required forms, fully completed.

Q: My money is currently in a 401(k) account. How do I roll it over to an annuity?

A: This depends on your employer's procedures for issuing such checks. Best to contact your Human Resources ("HR") department and ask them. They may send you a distribution request form to fill out. Once that's processed, you'll receive a check made payable to the insurance company for your benefit. This type of check is usually sent to the employee's home address. Since the check is made payable to the insurance company, it's still considered a direct rollover and tax-free. Just send the check to the insurance company with a note explaining these are your funds to pay for the annuity you previously applied for. Around May 15th of the following year, you'll get a Form 5498 from the insurance company confirming the amount on the check was invested in your IRA annuity. Some employers accept insurance company paperwork and will cut a check that is mailed directly to them.

Q: The lump sum pension distribution check I received from my employer is made out to me rather than to the insurance company. Will I still be able to avoid taxation on the distribution?

A: YES. To avoid taxation on your distribution, you will need to roll over the funds into a 401(k) annuity within 60 days. If your distribution is not settled into an annuity within this time period, you will owe taxes on the distribution. To expedite this process, check with your insurance company to see if it is one of the many that will accept a check made out to you but endorsed to it.

Q: I am under age 59 1/2. What tax penalties will apply to me?

A: If you are thinking of making withdrawals from your IRA or 401(k), but you are not yet age 59 ½, you can avoid the 10% federal penalty tax by transferring your IRA or 401(k) into an immediate annuity with a "life contingent" payment option. If you receive the income periodically over your lifetime you may avoid the 10% penalty tax on the money you receive. Remember, that you must choose an annuity which will pay you over the course of your (or your and your spouse's) lifetime(s) and not an annuity which only makes payments for a limited period or term certain (for a specified number of years). You can read about this exemption from the penalty tax in Publication 590 on the IRS website. One of the exceptions is the “Annuity” rule, which says: "You can receive distributions from your traditional IRA that are part of a series of substantially equal payments over your life (or your life expectancy), or over the lives (or the joint life expectancies) of you and your beneficiary, without having to pay the 10% additional tax, even if you receive such distributions before you are age 59½... There are two other IRS-approved distribution methods that you can use. They are generally referred to as the fixed amortization method and the fixed annuitization method." An immediate life annuity calculates its payments based on the fixed annuitization method, and, thus, satisfies the penalty exception rule.

Q: Do you provide assistance with IRA or 401k rollovers?

A: ABSOLUTELY! Since 1986, Ken Kaufman, owner of The Arizona Insurance Exchange, has helped his clients rollover their 401(k), 403(b), pension, and IRA holders rollover their lump sum payments into an annuity, without the need to pay taxes. This is a simple process with the right help, and we are here to answer your questions concerning rollovers and other options with expert advice. Call our customer care department toll-free at 877-468-6584 or direct to 623-977-3411 and we would be glad to help you.

Planning for Retirement...

Rollovers & Transfers

For almost 30 years, the Arizona Insurance Exchange has partnered with its clients to safely invest their retirement assets. Specializing in TRANSFERS and ROLLOVERS of Qualified (IRA, 401(k), 403(b), pension) and Non-Qualified funds, we would welcome the opportunity to discuss your short and long term goals to ensure that you are well positioned for the future.

Some of the most common questions that we are asked include the following:

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