3 Reasons a 401k Annuity May Not Be Best

Using an annuity 401k has become a popular way of investing retirement funds. However, there are a few drawbacks that are associated with this type of investment. Here are a few reasons that a 401k annuity might not be the best.

1. Fees

One of the big problems with this type of investment is the fees that are associated with it. You often will not know how much you are paying in fees because they are not transparent. You will simply provide the insurance company with a set amount of money every month and they will apply part of that towards their fees.

2. Changing Jobs

Another problem that many people have experienced with this type of investment is that it is difficult to convert what you have contributed if you change jobs. Since an annuity is a very long-term investment, you really need to be able to contribute to it for a number of years before you retire in order to get the full benefit.

3. Insurance Product

When you purchase an annuity for your 401k, you are really buying an insurance product with your retirement funds. If the insurance company were to go out of business, you could potentially lose the money that you have invested.

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