Should I roll my 401(k) into a fixed indexed annuity?
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Short answer: It can make sense for part of a 401(k) if you're near or in retirement, want protection from index losses or lifetime income, and won't need that money during the surrender period. A direct rollover to an IRA that holds the FIA keeps it tax-deferred. The annuity adds no extra tax deferral, so choose it for the floor or income.
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How the rollover works
If your plan doesn't offer the annuity you want, the usual path is a rollover to an IRA, with a fixed indexed annuity (FIA) as the IRA's holding. Think of the IRA as the box and the FIA as what's inside it.
How you move the money matters. The IRS rollovers page says a retirement plan distribution paid to you is subject to mandatory 20% withholding, even if you plan to roll it over. Withholding doesn't apply if the money goes directly to another plan or an IRA. If you take the check yourself, you generally have 60 days to deposit it.
Example: you roll $200,000 directly from your 401(k) to an IRA that buys the FIA. Nothing is withheld, and nothing is taxed until you take money out. If instead the plan paid you, $40,000 would be withheld, and you'd need to replace it from other savings within 60 days to roll the full $200,000.
What you could gain
- A 0% floor on index crediting for that money. Rider fees, surrender charges and market value adjustments can still reduce your account value.
- An optional lifetime income rider, usually for an annual fee.
- Tax deferral continues, but FINRA's annuities page notes an annuity inside an IRA or 401(k) adds no additional tax advantage.
What you could give up
- Market upside. Caps, participation rates and spreads limit your credit.
- Access. The SEC's Investor Bulletin says surrender periods typically last six to ten years, or even longer.
- The age-55 rule. The IRS says that if you leave your job during or after the year you turn 55, withdrawals from that employer's plan can avoid the 10% early-distribution tax. That exception doesn't carry over to an IRA, where the usual age is 59½. If you retire before 59½, this can matter.
- Your plan's features. Your 401(k) may have lower costs or features you'd lose by leaving. Compare before you move.
All or part?
It doesn't have to be all or nothing. Many people roll only the portion they want protected or turned into income, and keep the rest invested or in cash.
How it compares with a MYGA and a CD
If you want a fixed rate with no market link, a MYGA inside an IRA, or an IRA CD at a bank, are simpler comparisons. A CD is FDIC insured within limits. Annuities aren't. FIA and MYGA guarantees depend on the issuing insurer's claims-paying ability.
What the agent has to do
In most states (49 jurisdictions as of August 2025), rules based on the NAIC's Suitability in Annuity Transactions Model Regulation (#275) require an agent who recommends an annuity to act in your best interest. That means knowing your finances and goals, having a reasonable basis to believe the annuity fits, and explaining why. FINRA adds that an annuity in an IRA or 401(k) gives no additional tax advantage, so the reason to roll should be the floor or the income.
Sources: NAIC Model #275 and the NAIC's August 2025 implementation brief.
Questions worth asking
- How much of my 401(k) do I actually want protected or turned into income?
- Can the rollover be done directly, trustee to trustee?
- Will I need any of this money before 59½, or during the surrender period?
- Can RMDs come out without a surrender charge?
- How are you paid for recommending this rollover?
Plain-English FAQ
Will I owe taxes if I roll my 401(k) into an FIA?
Not if it's a direct rollover to an IRA that holds the FIA. Taxes are due later, when you take money out.
Can I roll over only part of my 401(k)?
Often yes, depending on your plan. Many people move only the portion they want protected or turned into income.
Do I need an IRA to roll a 401(k) into an FIA?
Usually. The FIA is set up as an IRA annuity so the money stays tax-deferred and keeps its retirement account rules.
Will I still have to take RMDs?
Yes. The IRS says you generally must start required minimum distributions from a traditional IRA at age 73, or 75 if you were born in 1960 or later. Ask whether RMDs can come out without a surrender charge.
Ready for your number?
Every contract has its own caps, fees and surrender schedule, so the general rules on this page only go so far. You can get a free one-minute income quote at quote.garycosby.com, and if you choose, talk with one of our licensed agents about how a specific contract works. It's your money and your decision.
More guides
- What is a fixed indexed annuity?
- How are fixed indexed annuities taxed?
- How do agents get paid for selling a fixed indexed annuity?
Sources
- IRS, "Rollovers of retirement plan and IRA distributions" (last reviewed May 31, 2026; checked October 23, 2026). https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions
- IRS, "Retirement topics: Exceptions to tax on early distributions" (last reviewed December 11, 2025; checked October 23, 2026). https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-exceptions-to-tax-on-early-distributions
- FINRA, "Annuities" investor page (page date not shown; checked October 23, 2026). https://www.finra.org/investors/investing/investment-products/annuities
- SEC Office of Investor Education and Advocacy, "Updated Investor Bulletin: Indexed Annuities" (July 31, 2020; checked October 23, 2026). https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-investor-bulletin-indexed-annuities
- IRS, "Retirement plan and IRA required minimum distributions FAQs" (last reviewed January 29, 2026; checked October 23, 2026). https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
- NAIC, Suitability in Annuity Transactions Model Regulation (#275) (© 2020; checked October 23, 2026). https://content.naic.org/sites/default/files/model-law-275.pdf
- NAIC, "Annuity Suitability 'Best Interest' Model Regulation" brief (August 2025, implementation status as of August 8, 2025; checked October 23, 2026). https://content.naic.org/sites/default/files/government-affairs-brief-annuity-suitability-best-interest-model.pdf
- Federal Register, "Required Minimum Distributions" final regulations, 89 FR 58886 (July 19, 2024; checked October 23, 2026). https://www.federalregister.gov/documents/2024/07/19/2024-14542/required-minimum-distributions
All figures on this page come from the dated sources above. Dollar amounts and percentages labeled Example are illustrations, not rates, quotes or predictions.