There are a lot of options available to you for financial investments. Life insurance, annuities, 401(k)s, savings accounts, stocks, bonds, and more. How do you choose what will be best for you? Maybe you already have a 401(k), but are unsure if it will provide all that you need. An annuity can be a great way to invest in your financial prosperity for your retirement years. But what’s the difference between these two types of investments?
If you have been keeping up with our blog, you have read about annuities and how they can help you. But you may be wondering, what is the difference between an annuity, which is considered a means of income during retirement, and your 401(k). A 401(k) in it’s most basic sense is a savings plan that is set up by your employer. Unlike an annuity, a 401(k) is not an investment; it is a means to holding your savings at a tax-exempt status till you decide to withdraw from them.
Pros and Cons
An annuity and a 401(k) both have those things that can benefit the buyer now and into the future. Here are some of the differences between the two:
- A 401(k) plan has a limit to how much you can contribute and an annuity does not.
- You must start drawing upon your 401(k) at age 70; an annuity does not have an age requirement.
- You have control over your annuity; your employer makes the decisions for your 401(k).
Though it is important to understand the pros and cons of each for your financial situation, often we, instead, like to think of how a 401(k) and an annuity can work to your advantage in tandem.
What Do You Choose?
As you can see, both a 401(k) plan and an annuity have their advantages. At the end of the day, whether you choose an annuity or a 401(k) is dependent on your financial situation. An annuity can be a great way to have additional income when you retire and can have many more flexible benefits. Interested in learning more about annuities and how to have a bright financial future? Contact Naples Life Insurance & Annuity Advisors today! We want to work with you so that you can have the best financial future now and into retirement.