What is a Good Rate of Return on 401k?

Shawn Plummer

CEO, The Annuity Expert

Understanding 401k Returns

A 401k plan is a popular retirement savings vehicle in the United States. The rate of return on a 401k can vary based on the investment options chosen and market conditions. Historically, the average annual return for a 401k is around 5% to 8% after inflation. However, this can fluctuate widely.

Factors Influencing 401k Returns

  • Investment Choices: Stocks, bonds, and mutual funds.
  • Market Conditions: Economic factors and market trends.
  • Contribution Levels: How much and how often you contribute.
  • Fees: Management and administrative fees.

Fixed Index Annuities as an Alternative

Fixed Index Annuities (FIAs) can be an alternative to traditional 401k plans. They offer the potential for growth based on a stock market index while protecting against market downturns.

Benefits of Fixed Index Annuities

  • Predictable Income: FIAs can forecast future retirement income through contractual guarantees.
  • Protection from Market Downturns: They provide a floor, ensuring you don’t lose principal due to market declines.
  • Potential for Growth: Returns are linked to market indices, offering growth opportunities.

Comparing 401k and Fixed Index Annuities

Feature401k PlansFixed Index Annuities
Return Potential5-8% average annual returnBased on market index
RiskVaries with marketLower risk; principal protected
Income PredictabilitySubject to market changesHigh predictability
FeesVary by planGenerally lower fees
SuitabilityLong-term growthSteady, predictable income


Choosing between a 401k and a Fixed Index Annuity depends on your risk tolerance, retirement goals, and need for predictable income. While 401ks offer the potential for higher returns, FIAs provide stability and predictable future income. Consider your financial situation and retirement objectives to make the best choice.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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