The Wall Street Journal recently published “Why Guaranteed Annuities Belong In 401(k)s” by Ted Jenkin. The author has been a personal witness to the happiness and security that having an annuity during retirement brings someone. His mother receives annuity payments every month and this brings her such happiness and relief in retirement, knowing that she will receive that income for as long as she lives. The public often associates annuity products with high fees, high commissions or bad sales practices. But these negative connotations are not the norm in the annuity industry. It’s time for annuity education and awareness to increase so that Americans can help secure their retirement with guaranteed income from annuity products.
One of the best ways to reach a large group of Americans is through their employer-sponsored 401k plans. Many financial experts have been pushing for a government mandate that requires 401k plan sponsors to offer a guaranteed income annuity as one of the options. It is almost solely up to individual Americans to save for retirement and make that income last for the rest of their life. That is quite a heavy burden to bear, and one that most people need some help with. 401k plans typically offer 10 to 20 different funds where you can direct your money. This can be confusing, especially for people who have no experience in the financial industry. The article’s author found that almost none of his clients were aware of the automatic online rebalancing feature available with their 401k plans. People are often just not aware of what is available to them or what it will take to make your savings last for as long as you live.
We cannot assume that the average person knows how to save money for retirement in a 401k or other sponsored plan and how to create income from that savings that lasts throughout their lifetime. It’s important for the financial industry, the government and certainly 401k plan sponsors to discuss the use of annuities as an option in 401k plans. A deferred income annuity guarantees a lifetime stream of steady income in exchange for either part of your paycheck during your working years or a chunk of the money you have saved in your 401k plan. Variable annuities and indexed annuities with income riders are other options to guarantee an income stream as well. Annuities cost more than mutual funds or low-cost ETF’s, but they offer a guarantee that can be priceless. The knowledge that you have a lifetime stream of guaranteed income can make or break your financial happiness during retirement and can only be created with an annuity product.