What type of annuity is recommended for calculating withdrawals from a 401-K to account for inflation?

A growing annuity is the correct choice for calculating withdrawals from a 401(k) to account for inflation because it is designed to provide payments that increase over time. This feature is particularly valuable in a retirement context, where the cost of living may rise due to inflation.

When planning for retirement, it is important to ensure that the purchasing power of retirement savings does not diminish over time. A growing annuity delivers a series of payments that grow at a specified rate, allowing retirees to maintain their standard of living as prices increase. This means that not only will the withdrawals keep pace with inflation, but they will also provide the retiree with the ability to adapt their spending as necessary.

In contrast, fixed annuities provide a set payment amount that does not change, which could lose value in real terms if inflation rises. Variable annuities depend on the performance of underlying investments and can indeed lead to fluctuating income, but they do not inherently provide a guaranteed increase for inflation. Immediate annuities start payments immediately but, similar to fixed annuities, do not account for inflation unless specifically designed to do so. Thus, a growing annuity stands out as the best option for those looking to ensure their withdrawals from a 401(k)