Could you please elaborate a little more on your paragraph "take a portion of your rollover money", specifically regarding rmds?
Thank you
Sam

Terry Says:

OK, suppose you retire and face the decision of what to do with your 40l(k).  I typically suggest rolling it over into an IRA rollover account at a place like Vanguard, Fidelity or T. Rowe Price.  (The only exception might be if you have a special deal inside your plan that offers you a higher interest rate safe investment, or if you have company stock.  In the latter situation, check with your accountant for special treatment of company stock.)

Sadly, many retirees are literally “attacked” by salespeople offering them “great deals” on all kinds of investments — including annuities.  Usually those are great deals for the salesman, not so good for the retiree!

Now, it’s understandable that you might want to use a “portion” –perhaps 25 or 30 percent — of your rollover to buy a lifetime annuity — a check a month of your life, or yours and your spouse’s life.   But that will be a fixed amount, and might not keep up with inflation when it returns (and it will!))  That’s why I recommended only a “portion” of your money be invested in this way.

When it comes time to take RMDs, the money from the annuity can be used to (partly) fulfill the required withdrawal.  And if you buy a “deferred income annuity” that doesn’t start paying out until you are well into retirement, the amount you invest in it (limited to 25% of your IRA to a max of $125,000) will not be included in the RMD calculation.

 

 

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