The Benefits of Investing in a 401k Annuity

By investing in an annuity, 401k investors can provide themselves with several unique advantages. Here are a few of the benefits that come with investing in a 401k annuity.

Lower Interest Rate Risk

If you were to purchase a traditional annuity on your own, you would be paid during retirement based upon the market interest rate at the time that you bought your annuity. Therefore, there is some risk involved as to when you choose to buy. With the 401k annuity, you can eliminate this risk. The interest rate for the payments is based upon the average of the market interest rate during the investment period.

Overcome Psychological Barriers

When given the choice to purchase an annuity with a lump sum, most people cannot go through with it. Having to hand someone several hundred thousand dollars can be very difficult when you work so hard to accumulate it. By using this strategy, you will be able to purchase the annuity over time in small payments.

Guarantee Your Retirement

This type of investment can effectively guarantee your retirement income. An annuity will guarantee to pay you a certain payment per month for the rest of your life depending on how much you invest. This provides some peace of mind for those saving for retirement.

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