For awhile now, annuities with income riders have been acceptable investments in main stream 401(k) plans. In recent news, they are now even available as the default option for many 401(k) plans. These popular retirement vehicles were typically reserved for IRA rollovers outside of a 401(k)...
and there is a reason for that. Annuities have many flaws and benefits, but one of which is the higher fees you pay for an income rider. The problem with annuities in 401(k)s is that over the 35+ years, the fees drag down on your returns. Remember, though, for the fee, these income riders offer a guaranteed withdrawal rate for a certain time, sometimes a lifetime, regardless of the underlying investments performance.
Our typical philosophy is to consider an annuity (of course, if appropriate and depending on the situation..consult your advisor!) CLOSER to your retirement. That gives your 401(k) and retirement investments more time to grow, with less 'drag' on your return from those pesky fees. THEN, when retirement is imminent, consider investment in the annuity with an income rider at that time.
So to recap, lower fees could translate to a higher rate of return on the 401(k) and will usually translate to a higher balance. This higher balance can then be invested in an annuity with a living benefit, which would generate a higher lifetime income (compared to investing in an annuity the whole time) all else equal.
Another thing to keep in mind- oftentimes the annuities available in the 401(k) plan may not be the best fit for you! Many of the providers in the open market could provide a better product, with lower fees and better benefits for you and your family's situation!