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Author: cable666 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76395  
Subject: Re: Use 401k to buy Annuity? Date: 11/17/1999 5:28 PM
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>>Usually, there is a 10% penalty when you take a lump sum out of a 401(k) before age 59 1/2, but that does not apply with the "substantially equal" withdrawals.<<

Most 401k's allow distribution before 59.5 without the 10% penalty in the case of death or disability, which this sounds like. You will of course have to pay income tax on it.

Now, I can not imagine any circumstances where it makes sense to liquidate a 401k to buy an annuity. It sounds like some insurance agent has your ear and is really pushing the "guaranteed income for life" feature of the annuity he wants to sell you. He probably even showed you fancy graphs the prove how inexpensive it can be. Don't believe it for a minute. Their "charts" make some pretty agressive assumptions. The reality is far different and very expensive.

I'd bet that every Fool here would agree that you would be better off rolling over the 401k to a self directed IRA, investing it yourself, and then taking distributions.

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