By in Advanced Investing, Investing, Money Management, Saving | 12 comments

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“Hi, Barbara. I hope you don’t mind me reaching out to you. When I left my job, I
left $130,000 in a retirement account. I met with a financial advisor who
suggested an annuity, but I am not sure that is the best bet. I know you can’t
officially offer financial advice as an advisor, but what do you think of a
variable annuity from Allianz?

I would like to convert it all to a Roth IRA but know we can’t take the tax hit in one year. I would appreciate any insight you can give. Thanks!”


You are right, I can’t “officially” offer advice, but I would be more than happy to give you my off the record opinion!
You are very smart to consider converting your retirement account to a Roth IRA. Roth IRA’s have several benefits, including tax fee withdrawals. This is particularly attractive if you believe, as I do, that tax rates in the future will be higher than they are today. Another advantage of the conversion is that you don’t have to convert the whole amount in one year. You can convert it bit by bit so as to minimize the tax hit in one year! The website gives details in Publication 590 concerning Individual Retirement Arrangements.


Financial advisors “love” annuities because of the high commissions the anuity seller receives. That said, there are advantages to annuity insurance products. In exchange for a lump sum payment, an annuity offers you a lifetime inome stream. If you want to check out an annuity in order to get the financial security that an annuity offers, there are some which have lower fees annd commissions, but you need to research them online yourself.
Whenever you purchase any product from an investment advisor, understand how the seller is being compensated. That gives you a grasp of potential conflicts of interest. Typically, fee only financial planners, are usually (although not always) the most trustworthy since they aren’t dependent on selling you a product in order to get paid.
It’s very important to keep yourself educated about where your money is invested and the fees you are paying.
What is your experience with financial advisors and/or annuities?
image credit; Lasse Christensen


  1. This can be a confusing and stressful situation when leaving a job. I would agree that an annuity is often not the best option, especially those sold by commissioned or Fee-Based advisors. There are low-cost, no surrender charge annuities that these folks won’t show you as they do not earn a commission from them.

    Other options can include leaving the moeny with the former employer, rolling it to a new employer’s plan if you are switching jobs and the new plan accepts roll overs, or rolling to an IRA. The right answer depends on many factors and a good Fee-Only (I’m biased) financial advisor should be able to walk you through the pros and cons of each.

    One caution if you are considering ultimately converting some or all of the moeny to a Roth, run the numbers. Roths have many good features, but ultimately the taxes can be onerous even if you convert gradually as Barbara suggests. Here the time value of money comes into play, how much will some unknown future tax savings really be worth to you?

    Roger Wohlner

    November 13, 2011

  2. I like the way you handled the question. Providing the information and letting the reader make their own decision is perfect.


    November 13, 2011

  3. Roger, Thank you so much for the detailed information. It really adds to this article.
    Krantcents, Once you get the information, most people can make good decisions for themselves.

    Barb Friedberg

    November 13, 2011

  4. Great post Barbara! I too think that all individuals need is the information in an easy way to access and understand.. that’s why I started blogging in the first place.

    20's Finances

    November 14, 2011

  5. I was lucky that I was able to transfer them last time I switched jobs. It made the whole process really easy and I didn’t lose any time for contributing.

    Great job on answering the reader’s question.

    Ps: love the new theme.

    Miss T @ Prairie Eco-Thrifter

    November 14, 2011

  6. Considering the amount in the retirement account, consider rolling it over to a Traditional IRA first and move the funds over to ROTH gradually.

    Doing a direct rollover to a ROTH will incur a big tax hit. Just be aware.


    November 14, 2011

  7. @20’s Yes, it is so important to be able to get straightforward information.
    @Miss T-The retirement funds transfer is so important and much easier than one would expect. whatever you do, don’t take the money from a retirement account and spend it.
    Money-Very good suggestion. The tax hit is big if the rollover into a Roth is done in one year!


    November 14, 2011

  8. What counts is to keep the same exposure this person had to the market, ie stay the course with your investment plan, don’t waste the money!


    November 15, 2011

  9. @Beating, Very good point!! So many people irresponsibly choose to take out their retirement dollars when they leave a job. That should be a last option

    Barb Friedberg

    November 15, 2011

  10. I’d just through out there, having both a Roth and traditional IRA will offer some income diversity in retirement. If taxes are low, pull more out of the traditional IRA. When taxes are higher, use more from the Roth. Just my 2 cents.

    JP @ Novel Investor

    November 16, 2011

  11. Hi JP, Actually, there are required distributions from an IRA once you hit 70. And with a Roth you can leave the money in or withdraw according to your preference. But, before 70, your idea has some merit. Thank you 🙂


    November 16, 2011

  12. Agreed on the annuity and the salesman’s commission. You sometimes have to wonder at advice of that caliber. A rollover into a traditional IRA, and phased conversion to a Roth seems to be a good path forward.

    101 Centavos

    November 19, 2011

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