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Annuities Should Be a Critical Part of 401(k)s

Brookings Institution in Washington is trying to persuade both employers and lawmakers that annuity products are critical to the future of 401(k) plans.  One of the main proponents of this “annuity initiative” is J. Mark Iwry, President Obama’s new deputy assistant Treasury secretary for retirement and health policy; according to Mark Bruno of Investment News.

Advocacy group The Retirement Security Project suggests that 401(k) participants be allowed to “test drive” annuities through different trial programs.  There is also chatter that the government should back annuities such as FDIC insurance backs bank accounts.  Iwry hopes that with these and other measures, making annuities part of 401(k) plans will help to increase the decline in equity markets.

The Profit-Sharing/401K Council of America claims that only 1/5 of companies are offering annuities in their retirement plans.  The perceived pricing and complexity have turned people off in the past.  However, employers can receive great pricing from the providers of annuities simply by increasing the number of users.  The Retirement Security Project’s plans for a trial program including deferred annuities seem to make for a winning situation for all involved.  Let’s hope that Iwry can get his “annuity initiative” to roll forward.

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