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The Difference Between Annuities and 401k

Presenter : All Things Annuity

Category : General Annuity Info

Topic : Annuities vs. 401k

Length : 4 Mins

Article : The Difference Between an Annuities & a 401k

Tags : Annuities, 401k, retirement planning,

About this Video

This video explains the differences and connections between an annuity and a 401k. An annuity is a contract between you and an insurance company, while a 401(k) is a qualified retirement plan that allows eligible employees of a company to save and invest for their own retirement on a tax-deferred basis.

Annuity vs. 401k Overview

Within the parameters of the plan and IRS contribution limits, it's entirely up to you to decide whether or not you want to participate in the 401(k) and how much you will contribute each paycheck. Your employer may also choose to make contributions to the plan but that's entirely optional. Your contributions are deducted from your salary on a pretax basis so that by contributing to a 401(k) you get to lower the amount you pay in current income taxes. You will not owe income taxes on the money contributed until you withdraw it from the plan.

Annuities are not a work sponsored retirement plan. There are no restrictions on adding money and you can invest in an annuity whenever you want. There's also no limit to the amount of money you can invest in annuity. As stated before, annuities are private contracts between an insurance company and individuals. 401(k) plans are between an employer and its employee.

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