Annuity Products in Retirement Plans

Despite the work of the government and many insurers, the use of annuity products in retirement plans is not as common as it should be.  Daisy Maxey’s Market Watch article, “Annuities in retirement plans remain rare,” lists some of the options available to investors.  Many retirement plan administrators don’t think that the appetite is big for annuities, but BlackRock Inc. says that their research has shown increased interest from plan participants.

Prudential Financial offers IncomeFlex for defined contribution retirement plans.  The variable annuity was revamped in 2009 to meet changing demands from plan participants.  Investors receive a guaranteed lifetime payout of at least 5% starting at age 65, for a 1% yearly fee.  There are 7,000 different retirement plans offering Prudential’s product and over $500 million invested, an increase from last year of $200 million.  Fidelity has a program to help retirement plan investors create portfolios by analyzing their individual situation.  Some investors worry that 5 year fixed annuity and other annuity rates are fairly low now, but Fidelity can help investors understand the value these annuity products will bring them in retirement.

The U.S. Department of Labor has been looking into multiple regulations regarding annuity products and their use in 401k annuity plans.  Some retirement plan sponsors seek more regulation before introducing or expanding their 401k annuity offerings.  BlackRock Inc. and MetLife Inc. are working together on the LifePath Retirement Income Fund annuity, but would like more clarification from the government on their fiduciary responsibility offering 401k annuity products.  While annuity products are available for purchase by retirement plan participants, the industry is still working on making them more readily available to ensure guaranteed retirement income for investors.

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