No, that product has absolutely no place in a tax deferred account like a 401k or IRA. None. For anyone.
I donāt think that annuity is a good idea for youā¦ at all, but I did find this in a review of that annuity. It appears (and I donāt know the law) that you would not pay taxes on your 401K withdrawals - I guess you can roll it into the annuity without paying taxes. This is what the reviewer wrote:
That makes it less horrible, but stillā¦
At least thatās something, @NJres. God forbid you have to cash out your 401K to fund an annuity.
But why would moving 401k money into an annuity be of any investment or tax advantage compared to leaving the 401k money in the 401k or moving it to an IRA with lower cost investments, at least until you reach the age of required minimum distributions?
Thatās what makes it more horrible. Annuities are sometimes not terrible because they give you tax deferral. But if you already have tax deferral because itās in a 401k or IRA, the annuity doesnāt add any āextraā tax deferral, it just adds expense and complexity.
I think for someone who feels that they need to be assured of stable income, it could provide peace of mind, kind of like having social security payments. No matter what the market does, or if I lose my mind, there will always be that income coming in. I donāt have to think about what to do with my money.
Might not be a bad deal if you didnāt have to wait ten years until collecting.
On another note, what does one do with money they want to invest right now? My parents, my kids, we all have that problem. Donāt want to invest near the top of the market, especially with an election around the corner and Covid. We all seem to be just waiting it out.
I truly need to spend more time reading about investments. At least, I follow this thread religiously.
At one of my fidelity meetings, they brought in an expert annuity person. I guess I wasted hours of their time, cuz their pitch was that Iād have a regular income coming in, like a pension. As a single mom, Iāve always been frugal. This week was expensive, as AC broke, garage door motor broke, new fence gates, ā¦ but I donāt need an allowance to do repairs. On the other hand, had I bought the annuity a year ago, Iād have guaranteed 5-6% interest on capital. Iām only 30% in equities, so I havenāt capitalized on recent gains. Still, the annuities forms seemed so detailed and incomprehensible, there was no way Iād trust a salesman.
Short term bonds. My FAs both have invested in them as a holding pattern. It is a very confusing time. The Fed and government have pumped our so much liquidity that asset prices are going up despite the lack of obvious justification, When it stops nobody knows.
Without the ten year wait, and with no life insurance bundled in, you would be buying just the annuitization (i.e. converting a lump sum into a stream of payments until you die). That is a simpler thing that is easier to evaluate without the two other things bundled in that you may or may not need or want.
Sorry, but no way an annuity purchased a year ago pays 5-6% interest. Most of that is return OF capital, not return ON capital.
I would have backed up the truck for 6% a year ago.
Paying for the peace of mind is not a waste. We pay for insurance although you rarely get what you put in. Or we choose a safe asset allocation and give up aggressive gains. You give up X today to receive Y a month, every month for life sounds good to me. The only question would be if the price is right and if the lifetime payment will be guaranteed.
How much cash is everyone holding in your investment portfolio? Not counting the set aside emergency fund.
I have not sold anything (other than vesting RSUs), but I just canāt bring myself to buy stocks or bonds. Other than the automated 401k purchases, and some selective rebalancing from US equities to international, not doing much.
Cash is beginning to pile up. To avoid accusations of āmarket timing,ā the worst thing you can accuse a Boglehead of, I frame it as building up my Emergency Fund.
I increased my cash position from around 30% to around 50% at the beginning of August.
So of course the market has continued to set record highs since then. 
My 83 year old mom is sitting on a bunch of cash right now. Normally a good chunk of that would be parked in a CD but those are paying almost nothing. (Her assets are well diversified; this isnāt the bulk of her investments. She also get a pension.) This allocation of money is earmarked for any nursing home or assisted living that might pop up.
We are increasing the amount in our Donor Advised Fund. Our charitable giving is going way up this year.
No cash except for what is needed to pay the bills. Some bond funds, but no cash.
Since we have retirement funds we can take money out for āemergenciesā as being over 59 1/2, we do have our checking account build up cash for more major purchases or as emergencies come about. We have taken money out of annuities a few times, and it was pretty easy/quick.
We have no pensions.
In order to diversify beyond 401K and Roth IRAs, we have purchased annuities. Very carefully selected by our FA - and they are doing well. Three contracts with one insurance co, and two contracts with another, with investments from 9/2013 to 3/2018. They are all doing very well above what any bond fund would have done and we have guaranteed bottoms; they are indexed and have annual selection of changes in the strategy allocation (getting rates and values for the new contract year). Some years one insurance product does better, other years the other does betterā¦
Key is that our FA knew what to look for in annuities for his clients. Yes he earned money selling them to us, but we also gained the diversification we needed to reduce our risk from having high amounts in equities.
The 2019 edition of āA Random Walk Down Wall Streetā discusses investing a retirement nest egg in their section āA life cycle guide to investingā - several pages devoted to annuities (including four possible disadvantages of annuities). Several pages on ādo it yourself methodā on retirement nest egg.
@MomofJandL Bonds are also expensive. I rebalanced between bonds and stocks when it was going down or up. Now, I am thinking I will keep cash when I rebalance.
@lxnayBob If you donāt sell any stocks, how do you rebalance? Do you just let it run up or down?
āRebalanceā might have been the wrong term. I adjust my US vs International allocation by selling US and buying International or World. Ordinarily I rebalance when buying additional shares, but I just donāt have the appetite.