What is the difference between a retirement annuity and a pension fund?
Retirement planning is fraught with a lot of jargon and competing products sold by brokers. Two common types of products to help people save for retirement include retirement annuities and contributions to a pension fund.Similarities Between the TwoBoth retirement annuities and pension fund contributions are designed to be “hassle free, set it up and ignore it” investments. They allow direct payroll deductions and straight-up contributions, usually with some tax-deferred benefits.Pre-tax vs. Post-tax EarningA pension fund contribution comes out of pre-tax earnings. Purchasing a retirement annuity comes out of post-tax earnings. This simple difference means that a pension fund (such as a 401(k) program) should always be contributed to first and foremost.Annuity Investment StrategiesRetirement annuities are invested by the insurance company selling the product. Insurance companies aren’t out to set the investing world on fire; they take low risk, hum drum, nearly zero growth after inflat
