401k Annuity: Newest Payout Choice

The deadline has passed for the government’s RFI regarding offering annuities as a 401k option for retirees.  According to The Columbus Dispatch’s article “Lifetime annuity may become new payout option for 401(k),” author Robert Powell says that the consensus from the RFI seems to be that there is no consensus.  The U.S. Labor and Treasury Departments received more than 600 letters with opinions on the 401k annuity.  The government’s hope is that through annuities offering a lifetime stream of income to retirees, Americans will have a more secure retirement relatively free of financial worry.

Experts have been asked what will likely come from all of the information the government has received.  They believe that regulators and lawmakers will probably make lifetime income annuities a necessary option for 401k distributions.  Other countries already have this option in place.  They also think the government might add annuities to QDIAs, or qualified default investment alternatives.  There is no harm in offering annuities to retirees as long as they are fully informed on the benefits and risks.  No one will be forcing anyone into actually purchasing an annuity with any or all of their 401k funds.  It will just be an option offering guaranteed lifetime income in retirement.

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