FREE NEWSLETTER
Vanguard has announced it will be offering an annuity option to 401k plan sponsors next year. It will allow the participant nearing retirement to elect a portion of their account to be an annuity payment.
Let’s hope plan sponsors add the option
A steady income stream and still keep investments. I have been advocating for this for years.
HALLELUJAH ‼️‼️‼️
There should be an option for you to purchase guarantee income only if you live longer than 95 years old. About 10% of people retire at 65 would live pass 95, so if you worry about running out of money if you live that long, you should be able to purchase that future guarantee for a smaller premium. (from one of the investment advisor firm)
Hung, are there any insurance companies that will issue a deferred annuity to someone that old?
Here’s my two nickels (pennies are history). An annuity option should be available at the time of retirement. It should be a single premium immediate annuity (SPIA), with the same options as a defined benefit pension, as well as a return of premium rider. Participants should retain control of the assets during the accumulation phase.
The insurance industry is a powerful lobby, and is probably foaming at the mouth with the possibility of mucking up the system with all sorts of goofy annuity products, and the fees that come with them. Lawmakers should strictly regulate the types of annuity used in retirement plans.
I know many workers who enter a state of paralysis when faced with investment decisions and risk. Such folks often have all their savings in the stable value fund, earning sub-par interest rates. For such folks, I’d like to see options available for building CD ladders. I think they are available in certain defined contribution plans, so why not all plans?
R Quinn…Unlike several of those responding to this article, I agree with your perception of this being a positive step forward for the average employee and average investor. Based on the lack of financial intelligence of the vast majority of consumers of financial products, having the options worked out for them is key, since otherwise, they would either pick wrong or not pick at all. Sort of like people in 401-k or 403bs, with all their money in GIC accounts.
As someone who purchased a series of 4 large annuities prior to retirement, 3 of 4 with Roth Dollars, I absolutely love the checks that are deposited in my bank account on the 5th, 6th, 7th, and 15th of every month, along with our social security checks on the second Wednesday of every month. Having a significant guaranteed income provides the greatest peace of mind imaginable.
Just like I find on the Bogleheads website, many HD readers are apparently “annuity averse,” to say the least.
The one annuity I funded with Traditional IRA dollars will be converted to Roth over the next 2 years, while keeping me in the 12% tax bracket, and within 4 years, approximately 50% of my current traditional IRA will also be converted to Roth Dollars, because of the One Big Beautiful Bill provisions in effect for these 4 years. Five years from now, 90% of my income will either have COLA and/or be income tax-free.
Those opposed to annuities are only too happy to accept their Social Security Checks…the world’s best annuity…so it is a mystery to me why so many are averse to owning additional annuities controlled by the investor.
To each their own…so they say!