Why would anyone buy an ­annuity in a 401(k) rather than a taxable account? After all, one big appeal of annuities is that your money grows tax-deferred—a break that seems wasted in a 401(k), where all investments are tax-deferred. Currently, only about 5% of defined-­contribution retirement plans such as 401(k)s offer annuities, which require paying a lump sum up-front in return for regular, guaranteed payouts for life. 

But there are advantages to having annuities in 401(k)s. Citing those advantages, the US House of Representatives approved a bill in May to make annuities more widely available in 401(k)s. 

You get professional oversight. When you buy an annuity on your own, you may face aggressive salespeople and tricky fees. Retirement-plan sponsors can vet annuities and their providers.

Your retirement accounts have more assets to pay for annuities. Many employees have the majority of their long-term savings in retirement plans rather than taxable accounts. 

You will get a better deal. Annuity providers often give institutional discounts to 401(k)s, which means a lower up-front cost and/or a higher payout. Also, women benefit from the fact that annuities must be gender-neutral in 401(k)s. Outside of a 401(k), women get worse terms than men because they have longer average life spans.

If you consider a 401(k) annuity…

They’re best for individuals with above-average health/life expectancies. Also, you probably shouldn’t buy one if you have more than 10 years to go before retirement because your situation could change. 

Be wary of fixed-index annuities. These let you participate in market gains if stocks rise and protect your original investment if the market drops, but they often have high fees and restrictions, such as surrender penalties.