Retirement Planning: 401(k) vs. Annuities

Which retirement plan reigns supreme? 401(k) or annuities? Find out the pros and cons of each option and which one will help you live your best retirement life!

When it comes to retirement, two main contenders are always in the ring: the 401(k) and annuities. Each has its own advantages, but which one is the winner for your retirement goals? Let’s break it down!

What’s a 401(k)?

A 401(k) is a tax-deferred retirement account that allows you to save and invest for your retirement while deferring taxes on the contributions until withdrawal. Employers often offer matching contributions, making it an attractive option for long-term saving.

What’s an Annuity?

An annuity is a financial product that guarantees a steady income stream during retirement. You can convert a lump sum of money into monthly payments for as long as you live. Fixed annuities provide predictable, reliable income, while variable annuities offer higher returns, but with more risk.

401(k) vs. Annuity: The Pros and Cons

• 401(k):
  • Pros: High contribution limits, employer match, variety of investment options.
  • Cons: Investments can lose value, especially with market volatility.
• Annuity:
  • Pros: Guaranteed income for life, tax-deferred growth.
  • Cons: Fees can be high, and you lock up your money for a long period.

Which One Is Right for You?

It depends on your situation! If you want flexibility and potential growth, a 401(k) might be your best bet. If you prefer stability and want to guarantee income in retirement, an annuity could be a better choice. At The Policy Shop, we can help you understand which option is best for your needs!