Annuity Vs. 401k: Do 401k Plans Offer Annuities?
So, what are we talking about today? Stan The Annuity Man, America's annuity agent licensed in all 50 states, including yours. We're talking about 401ks and annuities. Which one's better? Does your 401K offer an annuity? Should your 401K offer an annuity? If your 401k doesn't offer an annuity, what do you do? You know what? I'm going to cover all of those topics, all of those questions in detail.
401ks and annuities, let's talk about that for a second. The Secure Retirement Act, passed in 2019, encourages 401ks to start offering annuities that guarantee lifetime income within that plan. Instead of you choosing mutual funds, you're going to be able in the future, hopefully with your plan, that 401K type plan, a retirement plan that your company offers, you're going to choose annuities for future income. The hope.
And if you do, that's good because Social Security was never put on the planet for lifetime income as your primary source, but unfortunately, most people rely on that. Hopefully, you are not one of those. Should an annuity be part of your overall income flooring plans? Probably. Now less than 10% of companies, private companies offer pension plans. Remember those dutiful pension plans? You got the FRolex, I call it a fake Rolex. You got the FRolex, and then you got the pension, if you work forever for the company, those really don't exist anymore. Less than 10% of the companies have it. If you work for the government, you don't get a FRolex. You're going to remember that FRolex, and it's the things you buy on the streets in New York City that look like a Rolex, but it's not; it's a FRolex, it's a fake Rolex. I digress.
Lifetime Income Guarantees
But if you're working for the government, you're getting that pension income stream, which is an annuity. So, you can't hate annuities and then hate your pension. You can't hate annuities and then hate Social Security because they're all annuities. It's all lifetime income guarantees. So, for those of you out there that have these retirement plans, what I call accumulation plans, it's been growing and growing and growing and growing and growing, tax-deferred like a 401k. You've had it in the mutual plans. We've been in a roaring bull market before where you could literally monkey throw a dart at the wall and pick the stock, and it goes up. Eventually, that's going to end. But fortunately for you, you've ridden that train, ridden it right up.
The Finish Line
So, what do you do now? You're at the finish line, you're at retirement, and you're considering whether you should transition from growth to income. And with 10,000 baby boomers reaching retirement age every day, I mean, there's a demographic tidal wave of people looking for contractual guarantees. And typically, those contractual guarantees they're looking for are lifetime income. Because I'm assuming now that when you retire and you get to the finish line, the only thing that matters is for that income stream to hit your bank account every single month so you can see your kids and grandkids, nod your head.
And if you're not nodding your head, your spouse is. You know what I'm saying? Because my wife, I love her, been married to me for over 30 years. Bless her heart. She could give a rip about any of this investment and annuity stuff. She could care less. She's tired of seeing the logo. All she cares about is our daughters, going to see our daughters and hopefully grandkids in the future. I've got names for them, by the way. If it's a girl, it's Stanielle or Stanetta, obviously. If it's a boy, it's Stan or Stanford. Those are my choices. I think they are logical choices. I think Stanetta is a girl, or Stanielle is beautiful. Danielle, Stanielle? No, I digress.
So, you're looking for lifetime income. You have a 401k. If they offer an annuity inside of it, great. Choose that. By the way, if they don't offer it, you can yell at your plan now with the Secure Retirement Act and say, "Hey, the government said it's okay to put one in, so put one in because I need income for the future to compliment my Social Security. Yes?"
But if they don't, or you need more income, then you will have to look at an annuity. I know it's horrible. Why isn't there another product that can give me lifetime income for the rest of my life that I can never outlive? I don't know. But all I do know is annuities are the only product on the planet that will pay you for the rest of your life or pay you and your spouse or partner for the rest of your life regardless of how long you live. The annuity industry has a monopoly on that benefit proposition. So, you're telling yourself, why don't I know that? Good question. I mean, if I'm The Annuity Man for the day, I'm pounding the table, I'm wearing the "Got Guarantees" t-shirt, which you've seen on previous videos like "Got Milk," right? Because annuities provide that lifetime income stream.
Guaranteed Income Floor
Getting back to the point, and the question is, you need lifetime income. My advice to you is to get your pencil out, sharpen it up and say, okay, we're getting this for Social Security. We're getting this out of dividend income. We're getting this coming in like rental income. What's my gap? What's that gap that I need to fill? Lifetime income that's going to hit my bank account every day? I call that the guaranteed income floor. You're laying the floor, player. You need flooring, and you need income flooring. You like player, right? That's good. You need an income floor. So, annuities are part of that income floor. The question is, how much gap do you need to fill? If it's like, "Hey Stan, The Annuity Man, me and the wife need," or, "Me and the husband need $2,222 a month to fill in that gap, what do I do?"
As America's annuity agent representing almost every carrier on the planet, I can reverse engineer a quote. I can put it into our annuity calculators that are proprietary and the number one annuity calculator on the planet, and say, "Here's the amount that we need per month," and then have all the carriers bid on that to show how much money it would take to create that contractual guarantee. And oh, by the way, we can set it up to when your Learjet hits the mountain, 100% of the money goes to the beneficiaries that's left in the account. The evil annuity company doesn't keep a penny. That's how it works. So, you need to ask yourself a couple of questions. Two questions, actually. What do you want the money to contractually do? And when do you want those contractual guarantees to start? And if it's income, give us those specific parameters, and we will run those quotes for you so you'll get a feeling of how this works.
By the way, all lifetime income streams are based primarily on your life expectancy at the time you take the payments, not interest rates. Interest rates play a secondary role. It's all life expectancy driven, just like your Social Security.
What’s Best for You?
Ok, back to 401ks. If you're talking about 401ks and annuities or transitioning from 401ks to annuities, you need to find out what the best annuity is for you, right? They're not all the same. There are different types of annuities; they all have different benefit propositions and limitations and good and bad. No products are perfect. Can we agree with that? Nod your head. We can agree with that. If it sounds too good to be true, it is every single time with annuities. They're contracts, so be careful out there. Do not buy the dream because you will own the contractual realities. Own an annuity for what it will do, not what it might do.
Now with that, subscribe to my YouTube channel. If I knew where you were, I'd drive to your house, knock on the door and say, "You just read this blog. Please subscribe to the channel."
Why? I don't know. I just want you to, that's all I'm asking. And for that, I'm going to give you my books for free. If you go to my site, I've written seven books on annuities in my spare time. I do like writing and educating, and you can download my books for free because you need to understand how these annuities work. If you want to see quotes and run numbers, go to our annuity calculator page. And with that, I will see you on the next Stan the Annuity Man blog.
Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.