Annuity vs 401k Comparison Calculator
Annuities promise guaranteed lifetime income but carry 1-3% fees and limited flexibility. 401(k) plans offer market exposure, low costs (sub-0.5%), but no income guarantee. The right choice depends on longevity, fee tolerance, and other guaranteed income sources.
Why 401k Usually Wins On Accumulation
401(k) fees average 0.40-0.60% all-in (admin + funds). Variable annuity fees average 2.0-3.5% (M&E + admin + rider). On a 10-year hold of $250K, the fee gap alone costs an annuity $40,000-$80,000 in lost growth. Index annuities can be cheaper (1-1.5%) but cap upside at 6-8%.
When Annuities Make Sense
Three scenarios favor annuities: (1) Single Premium Immediate Annuity (SPIA) at age 70+ provides mortality credits — pays more than bonds with same money. (2) Qualified Longevity Annuity Contract (QLAC) starting at age 85 hedges longevity risk. (3) Pension-replacement for those without traditional pension and concerned about market timing of retirement.
Mortality Credit Advantage
Annuities pay survivors more by spreading mortality risk. A 70-year-old buying SPIA gets ~7% lifetime yield. A 401k holder at 4% safe withdrawal rate gets 4% yield. The 3-point spread is mortality credits — money from those who died early goes to those who lived. Becomes powerful at age 70+ as life expectancy compresses.
Source: Society of Actuaries Annuity Pricing 2025, Vanguard 401k Fee Benchmark 2025. Last updated: May 2026.