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More 401(k)s Compare Annuities

Insurance & Financial Advisor’s Bob Graham summarized a recent Towers Watson survey in his article “Lifetime income options drawing more attention in 401(k)s.”  The employers who offer 401k plans to their employees have turned their attention to annuities and other investments producing lifetime income.  Currently, 18% of employers either offer annuity options currently or plan to in the next year.  Another 30% of those surveyed said that they are looking into annuities for the future.  While this shows an increasing number of employers interested in annuities, there are still far too many who don’t consider the benefits their employees would receive from guaranteed lifetime income.

That is probably partly because most of the employers offering annuities don’t have many employees opting for the products.  Nearly 80% of those offering annuities in 401k plans only see 5% of their employees choosing them.  Employees need to compare annuities to other investment options to realize how well they can work in their retirement plan.  As traditional defined benefit plans become a thing of the past and account based plans become the norm, annuities are a good way to provide an income stream that will last throughout retirement.  Towers Watson consultants believe that while annuities are still not widely used in 401k plans, they are an important tool to bridge the gap in employees’ retirement income.

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