Should I Choose an annuity or a 401(k)?
Choosing an annuity or a 401 (k) is rarely an either-or situation. That said, there are some general rules of thumb to consider. If you’re already maxing out your 401 (k) and IRA for the year and you still want to save more for retirement in a tax-advantaged account, you could put any additional savings into an annuity.
Can You Fund an annuity with pre-tax money in a 401(k)?
Although you can fund an annuity with pre-tax money in a 401(k), you usually would purchase an annuity with after-tax money. The earnings from the annuity are then taxable when you withdraw them. However, the initial amount paid for the annuity is usually not taxable because, like a Roth contribution, you’ve already paid taxes on it.
Is a 401(k) better than a pension?
A 401 (k) can have the potential for more growth than a pension plan. If you invest aggressively and earn average to above-average returns, your money can grow faster, leaving you with a stronger nest egg. Pensions contribute a fixed amount based on your years of service and salary rather than market conditions.