401(k) Annuity
There is a new 401(k) annuity that has just been created and it is gaining popularity. Some companies are offering a new 401(k) annuity which is not to be confused with your typical 401(k) that a company offers. The main objective of a 401(k) annuity is to give you a steady stream of income once you retire and are out of the workforce. This works out as a good option for somebody who doesn’t have any insurance once they are retired.
There are basically two types of annuities, fixed annuities, and variable annuities. Both of those types of annuities are options in a 401(k) annuity. The fixed annuity is self-explanatory and gives you a mathematical payout over time. Depending on asset allocation and market performance the variable annuity varies in payout options.
One of the obvious problems with the 401(k) annuity is what happens if you change jobs? What happens if your new employer does not offer a 401(k) annuity? If your new company only offers the traditional 401(k) and you transfer your 401(k) annuity from your old employer this may cause a taxing situation.
Is this option available for you at your company? If it is contact your human resources department, or your financial administrator. You can also look to online forums and blogs to learn more about the 401(k) annuity and how it is starting to be available at major companies. A another good resource to find out more about the 401(k) annuity is to go to online brokers like Fidelity, Scottrade or even Morgan Stanley.
What most people don’t know is the 401(k) plans Were made available by the IRS.
The reason it was established was to let workers choose how they want to receive their income and whether they want part of it deferred so they are not in a higher tax bracket. This provisional 401(k) plans is also governed by ERISA which stands for “employee retirement income security act”.