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401(k) Vs. Annuity

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Joined: 03 Oct 2009
ROSS's page
Posts: 21

22 Magic Points

Subject: 401(k) Vs. Annuity
Posted on Sun Nov 22, 2009 7:56 am  

I plan to leave my job in April of next year I will be almost 65. I have never missed paying a bill and have always worked 2 jobs to educate my four children but I have arthritis and have difficulty doing my job. I am over $100,000 under water with a second mortgage and have a ton of credit card debt. If I leave both my pension and the 401(k) in the company's plan till after the proceedings, can I then roll it over to a self directed IRA? My lawyer wants me to take an anunity when I leave but that will put me over the income requirement for a retirement facility in Arizona where I want to go. I am sure this company has a ERISA type plan.

Joined: 09 Nov 2009
Archie's page
Posts: 57

37 Magic Points

Posted on Sun Nov 22, 2009 11:45 am  

Your attorney has provided you in regard to protecting your assets and putting you in the best position to successfully proceed with your retirement plans. If you do not think that your attorney is giving you sound advice, I recommend that you consult with another attorney for a second opinion, giving you the opportunity to fully explain the details of your situation to another legal professional.

If the facility to which you wish to retire has a limit on the assets its residents can own, converting the funds in your 401k to an annuity may be a wise choice. Although exempt in bankruptcy due to court rulings regarding ERISA accounts, 401(k)s and other retirement accounts are often viewed as assets for purposes of benefit eligibility, which may affect your ability to retire to the community of your choice.

However,annuities are frequently not counted among assets for these purposes, since, unlike a 401(k), you do not have the right to access the principal funds once they are placed in an annuity; you give up the right to access the funds in return for a guaranteed income. Since you no longer can access the funds, most plans do not view annuities as assets, which may be why your attorney is recommending that you use an annuity. Because I do not know the specific type of annuity you are considering, I cannot tell you exactly how the account will be treated in your bankruptcy proceedings, which is probably the primary factor in deciding if using an annuity makes good sense. Again, I strongly encourage you to discuss the matter further with your attorney, and if you are not fully satisfied with his answer, to seek a second opinion.

Joined: 09 Nov 2009
Archie's page
Posts: 57

37 Magic Points

Posted on Sun Nov 22, 2009 11:46 am  

One thing I want to add regarding attorney-

For a referral to an attorney for a second opinion, you can contact you local or state bar association's attorney referral service; you should be able to find the bar association's contact information in the phone book or by searching online. Most referral services offer a free or low-cost initial referral, so seeking the advice of another attorney should be relatively inexpensive

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