More choices, including 401k annuity products, could be a positive thing for retirement plans. According to Bank Investment Consultant’s “Do Annuities Belong in 401(k) Plans?,” Pamela J. Black ponders how 401k annuities fit into retirement plans. The Department of Labor has shown interest in changing policies and updating information so that more companies will join with those already offering employees 401k options in their retirement plans. Mutual funds almost exclusively held this business, so financial professionals dealing with those products seem to hope that things stay the same as they have.
One of the reasons many plan sponsors have stayed away from annuities is the fear of fiduciary responsibility should the insurance company offering the annuity go out of business. The government is working to clarify fair harbor provisions so that this fear of liability will no longer turn plan sponsors away from 401k annuity products.
Many financial experts agree that more choices are almost always a good thing when it comes to retirement planning. Some worry, however, that there may be some confusion related to the different products like fixed indexed annuities as well as costs associated with education and regulation. One big benefit which is also the reason that the government became involved in the first place is the possibility that people will remember the reason that these defined contribution plans came about. Saving money tax-deferred that is meant to be used incrementally in retirement is the goal of 401k plans. Unfortunately many people have just been using their 401k’s like a savings plan and spending the money when they switch jobs. The point of annuities are to grow the money tax-deferred and receive it in payments in the future to cover expenses.
