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    alanzone's Avatar
    alanzone Posts: 5, Reputation: 1
    New Member
    		  
    #1

    Mar 18, 2008, 08:54 PM
    401k tax and penalty
    An associate of mine has a 401k and wants to invest some of it in an annuity,
    Will it be taxed or penalized if it goes straight in there ?
    Thank you for any help
    Wildsporty's Avatar
    Wildsporty Posts: 445, Reputation: 38
    Full Member
    		  
    #2

    Mar 19, 2008, 07:17 AM
    He should not be penalized if he directly rolls over an amount from the 401K into a retirement annuity.

    He will not be allowed to roll over money from a 401K for any other type of investment unless he is 59 1/2.

    Shirley
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #3

    Mar 19, 2008, 07:25 AM
    Depends on a few factors. First, whether the amount he wants to invest is the result of a withdrawal or a distribution. If he's withdrawing it then it will be taxed and subject to penalty. However, if it's a distribution and he rolls it over into an IRA that invests in the annuity, that wouldn't incur penalty or tax.

    He can also talk to the admins of the 401K and see if they are willing to include an annuity as one of the investment options for the 401K.
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