What should an agent tell a client transferring a 401k into an index annuity?

The statement that earnings will grow on a tax-exempt basis is appropriate in this context because when a client transfers funds from a 401(k) into an index annuity, they are able to defer taxes on the earnings until they withdraw funds from the annuity. During this deferral period, the earnings accumulate without being taxed, which effectively allows for growth on a tax-advantaged basis. This feature is one of the critical advantages of using annuities, especially in retirement planning, where individuals aim to maximize their tax-efficient growth.

It's important to emphasize the distinction between tax-free growth and taxable events. The transfer itself, when done correctly as a rollover, does not create an immediate taxable event, allowing for continued tax-deferred growth of the investment. This makes annuities an appealing option for individuals looking to consolidate retirement savings or preserve tax benefits.