Annuities

When investing in 401 (K) plans there are two options, annuities or mutual funds. Because pension plans have pretty much vanished people are looking for different ways to invest there money. Annuities offer many advantages over mutual funds. Annuities give people the assurance of a stream of income for life or for a specific period of time.

With a 401 (K) annuity, you can invest as much as you want each month or each period. Longer life spans and the need to draw retirement savings for more years will increase the risk of outliving one's retirement savings. There are also no income restrictions and you can switch investments within your contract without paying taxes. Thanks to institutional pricing, they're much cheaper than the annuities you could buy on your own. They're also flexible, allowing employees to stop investing at any time or to sell their accumulated holdings with no surrender charges.

When you invest through a 401(k), the price of your annuity will be based on average rates during the period you invest in the option, which could include most of your working lifetime. That reduces the risk of sharp interest-rate fluctuations, says Jody Strakosch, national director for MetLife Institutional Income Annuities. With the economy's slide toward recession and the stock market volatility, annuities offer a lower risk then mutual funds.

If you change jobs you can leave the investment in the plan, get a certificate guaranteeing you the lifetime income accumulated so far, or you can roll over the account value in an IRA. With rollover, you lose the guarantee however. The Hartford has an IRA rollover option where you keep the guarantee and continue purchasing shares at institutional prices.

Annuities also offer the living and death benefit riders offered within most variable contracts today can provide critical principal protection for investors who may still need