Annuity vs IRA Rollover: Which Is Better For Your Lifetime Income Goals as You Turn 65?

Hey there! If you’re blowing out 65 candles on your birthday cake this year, first off, happy birthday! This is such a huge milestone. But I also know that along with the Medicare cards and the senior discounts, there’s a big, looming question that usually starts keeping people up at night: “What do I do with my 401(k)?”

You’ve spent decades Diligently tucked money away, watching those numbers grow (and occasionally dip, which is never fun). Now that you’re at the finish line of your career, you have to decide how to turn that big pile of "savings" into a steady stream of "spending money."

Most people think they only have one choice: roll it into an IRA and hope the stock market plays nice. But there’s another option that I talk about a lot here at Solomon Estate and Wealth Planning, the annuity rollover.

Today, let’s sit down and chat about the pros, the cons, and the "oh-I-didn't-know-that" details of choosing between an IRA and an annuity for your lifetime income goals.

The Traditional Path: Rolling Over to an IRA

Most retirees: about 90% of them, actually: take the traditional route. They move their 401(k) from their old employer into a Personal IRA (Individual Retirement Account).

The Pros of an IRA

The biggest reason people love the IRA rollover is control. When you move your money into an IRA, you have the keys to the kingdom. You can invest in almost anything: stocks, bonds, mutual funds, ETFs: you name it. If you’re the type of person who likes to check your portfolio and make adjustments, this flexibility is a huge win.

Another perk? Potential for higher growth. If the market is on a bull run, your IRA balance could continue to climb significantly even while you’re taking withdrawals. Plus, if you don't need the money right away, you can let it sit and grow until you hit the age for Required Minimum Distributions (RMDs), which currently starts at age 73.

The Cons of an IRA

The downside is what I call the "Retirement Red Zone" risk. When you rely solely on an IRA, you are 100% responsible for the market risk. If the market takes a 20% dive right as you start your retirement, it can seriously derail your long-term plans.

There’s also the very real fear of longevity risk: the technical term for "running out of money before you run out of life." With an IRA, there is no guarantee that the money will last forever. If you live to 95 or 100 (which many of my clients do!), you have to be very careful with your withdrawal rates.

If you're still curious about the basics of moving that money, check out our post on 401(k) rollover options explained in under 3 minutes.

The Security Path: Rolling Over to an Annuity

Now, let’s talk about the "guaranteed" side of the fence. An annuity is essentially a contract with an insurance company. You give them a portion of your retirement savings, and in exchange, they promise to pay you a set amount of money for the rest of your life.

The Pros of an Annuity

At Solomon Estate and Wealth Planning, we often recommend annuities for clients who want peace of mind. The biggest "pro" is the guaranteed lifetime income. It doesn’t matter if the S&P 500 drops or if the economy hits a slump; your check is coming in the mail (or direct deposit) every single month. It acts like a personal pension that you’ve created for yourself.

Another massive benefit is tax-deferred growth. Just like your 401(k), the money inside an annuity grows without being taxed until you start taking it out. This allows your interest to earn interest, which can be a powerful tool for building a larger "floor" of income.

The Cons of an Annuity

The trade-off for that security is usually liquidity. When you put money into an annuity, you’re often committing it for a certain period. If you decide you want to pull all your money out next year to buy a boat, you might hit "surrender charges."

Annuities can also be complex. There are fixed annuities, variable annuities, and indexed annuities. Each has different rules, which is why it’s so important to have a guide who can explain things in plain English.

For a deeper dive into why this has become such a hot topic lately, you might enjoy our article on why everyone is talking about rolling over a 401(k) to an annuity right now.

Side-by-Side: Taxes, RMDs, and Legacy

When you’re 65, your perspective starts to shift from "accumulation" to "preservation." Here’s how these two stack up on the things that matter most:

1. Taxes

Both a traditional IRA and a traditional annuity rollover will be taxed as ordinary income when you take the money out. However, if you have a Roth 401(k), the rules change. We actually just wrote a piece on the new 401(k) rules for 2026 that goes into more detail about tax strategies for high earners.

2. Required Minimum Distributions (RMDs)

With an IRA, the IRS eventually forces you to take money out, whether you want to or not. With an annuity, if you’ve "annuitized" the contract (turned it into a stream of payments), those payments usually satisfy your RMD requirements. There’s even something called a QLAC (Qualified Longevity Annuity Contract) that lets you push some of those distributions all the way to age 85!

3. Your Legacy

This is a big one. With an IRA, whatever is left over when you pass away goes to your beneficiaries. With some simple annuities (the "life only" kind), the payments stop when you do. However, most modern annuities have "death benefit" riders that ensure your heirs still get what’s left. It’s all about how you structure the contract.

The "Hybrid" Approach: The Best of Both Worlds?

Here’s a little secret: you don’t have to choose just one!

Many of my most successful retirement plans use a hybrid strategy. We might take 40% of the 401(k) and put it into an annuity to cover your "must-pay" bills (housing, food, healthcare). This creates a solid foundation of guaranteed income. Then, we take the other 60% and put it into a managed IRA for growth and "fun money."

This way, you get the security of the annuity but keep the flexibility and growth potential of the IRA. It’s like having your cake and eating it too: and at 65, you definitely deserve the cake.

A Resource for Your Journey: 'Wealth Without Walls'

I know this is a lot to take in. Retirement planning is a bit like a puzzle: you have to make sure every piece (Social Security, Medicare, 401(k), and Estate Planning) fits perfectly.

Because I want you to feel empowered in these decisions, I’ve put together a special resource. It’s my new e-book called 'Wealth Without Walls.' In it, I break down these strategies even further and show you how to protect your hard-earned savings from market volatility and taxes. You can find more info on how to get your copy over at https://angeliquesolomon.gumroad.com/l/gbocok.

Making the Right Choice for YOU

At the end of the day, there is no "perfect" financial product: there is only the product that fits your specific life goals.

If your main goal is to leave a massive inheritance and you don’t mind a bit of market "rollercoaster," the IRA is likely your best bet. If your main goal is to wake up every morning knowing that your bills are paid for life, regardless of what the news says, then an annuity rollover deserves a serious look.

Turning 65 is an exciting chapter. It’s about freedom, family, and finally doing the things you love. Don’t let the stress of 401(k) management steal that joy.

If you want to sit down and look at your specific numbers, I’m here to help. We can look at your retirement income calculations together and figure out which path makes you feel the most confident.

Let’s secure that future!

- Angelique Solomon

---

NPN: 20332097 States: AL, FL, GA, SC, VA, TX, OHIO Designations: L&H Phone: (334) 459-8264 Website:https://www.angeliquebenefits.com/