At Diversified Insurance Brokers, we help retirees and pre-retirees evaluate annuities with clear, unbiased guidance. If you’re wondering what an IRA annuity is—and whether it fits your retirement plan—this page breaks it down in plain English. In short, it is an annuity contract held inside an Individual Retirement Account (IRA). You get the IRA’s tax advantages combined with the annuity’s guarantees for growth and/or income. Used correctly, it can turn savings into reliable paychecks while protecting principal from market downturns.

Estimate Your Income From an Annuity in an IRA:

Use our calculator to preview income scenarios and see how different premiums, start dates, and riders affect guaranteed payouts.

What Is an IRA Annuity?

In its simplest terms, it is an annuity owned by your Individual Retirement Account. The IRA sets the tax rules (Traditional or Roth), while the annuity provides interest-crediting, principal protection, and optional riders such as guaranteed lifetime income. Many people fund an annuity that is owned in an IRA by rolling over a 401(k), 403(b), or existing IRA—keeping tax advantages intact while adding contractual guarantees.

Types of Annuities in IRA’s:

• Fixed Annuity (MYGA): CD-like simplicity with a guaranteed rate for a set term. Works well for conservative growth inside an IRA.
• Fixed Indexed Annuity (FIA): Interest linked to an index (e.g., S&P 500®) with downside protection; optional income riders can provide lifetime paychecks.
• Immediate/Income Annuity: Convert a lump sum to guaranteed income that starts now or at a chosen date—useful for creating pension-like cash flow in retirement.

Key Benefits

• Predictable Income: Optional riders or income annuities can convert savings into guaranteed monthly income.
• Principal Protection: Fixed and indexed annuities shield Individual Retirement Account principal from market losses (surrender charges/fees still apply).
• Tax Efficiency: IRA taxation applies (Traditional: tax-deferred until distribution; Roth: qualified withdrawals can be tax-free).
• Customization: Choose term lengths, crediting strategies, and riders to fit your income timing and risk tolerance.

Considerations & Trade-Offs

• Liquidity: Withdrawals beyond penalty-free amounts during the surrender period may incur charges.
• Capped Upside (FIAs): Participation rates, spreads, and caps limit potential gains in exchange for downside protection.
• Fees for Riders: Income or enhanced benefits can carry annual charges that reduce accumulation values.
• RMD Coordination: Traditional annuities held in an IRA must accommodate required minimum distributions under current rules.

When an Annuity in an Individual Retirement Account Can Make Sense

• You want guaranteed income to cover essential expenses alongside Social Security or a pension.
• You prefer principal protection with steadier growth versus full market exposure.
• You’re consolidating old workplace plans into a single, income-focused strategy.
• You value simplicity—turning part of your nest egg into predictable cash flow for life.

Illustrative Example

A 67-year-old rolls $300,000 from a Traditional IRA into an indexed annuity with a lifetime income rider, deferring income for two years. The rider credits roll-up features during deferral, then begins guaranteed monthly payments designed to last for life—creating a dependable income layer without market downside risk. (Actual results vary by carrier, product, age, and state.)