Author Topic: Annuities in 401(k) plans?  (Read 1561 times)

jinga nation

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Annuities in 401(k) plans?
« on: May 28, 2019, 07:49:38 AM »
The House passed a bill that would allow more annuities in 401(k) plans — is that actually a good thing?

https://www.marketwatch.com/story/the-house-passed-a-bill-that-would-allow-more-annuities-in-401k-plans-is-that-actually-a-good-thing-2019-05-28

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The SECURE Act is one step closer to becoming law, and with it, Americans would see a few tweaks to the way the retirement system works.

As part of the SECURE Act, which the House of Representatives passed last week, individual retirement accounts’ age cap would be lifted, small businesses would have more avenues to offer retirement plans to their employees and part-time workers would get access to 401(k) accounts. The legislation would also boost the use of annuities in retirement accounts — something that may tilt a few heads considering the bad reputation annuities typically get for being an upfront expense with an uncertain payout (such as, if the owner of an annuity dies before reaping the benefits, or being tied to a seven- to 10-year contract).

Currently, plan providers have the fiduciary responsibility to vet annuities but under the safe harbor provision of the SECURE Act, the onus would be placed on insurers to provide employers with the right products. Employers would be given guidance on how to ensure those providers and their products are up to par, including reviewing the insurers’ status under state insurance regulation and enforcement.

(posted to AWoSaC as I believe we like to facepunch annuities. Mods please move to Investor Alley if you deem necessary.)
« Last Edit: May 28, 2019, 07:51:42 AM by jinga nation »

MDM

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Re: Annuities in 401(k) plans?
« Reply #1 on: May 29, 2019, 11:10:21 AM »
The House passed a bill that would allow more annuities in 401(k) plans — is that actually a good thing?
Probably good for the insurance companies who will sell them.

Plugra

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Re: Annuities in 401(k) plans?
« Reply #2 on: June 09, 2019, 12:42:18 PM »
Presumably an annuity provided through a 401(k) could be offered as one of many retirement payout options, much as TIAA-CREF offers annuities as a 403(b) payout plan.  Those who like such things will find much to like about them. 

The big annuity scam is in the agent-sold annuities where the fees are huge, the contracts are confusing, and the buyers are uninformed.

SwordGuy

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Re: Annuities in 401(k) plans?
« Reply #3 on: June 10, 2019, 12:02:34 AM »
Presumably an annuity provided through a 401(k) could be offered as one of many retirement payout options, much as TIAA-CREF offers annuities as a 403(b) payout plan.  Those who like such things will find much to like about them. 

The big annuity scam is in the agent-sold annuities where the fees are huge, the contracts are confusing, and the buyers are uninformed.

We just met with the TIAA rep last week.   My wife insisted that one of her accounts in her 401K was an annuity.  I had read what I could find out about it and couldn't figure out what it was, but it didn't quite seem like an annuity.

Thankfully it wasn't.  It was a fund with a minimum payout (but lower earnings to compensate for the reduced downside risk), that *could be* annuitized (but wasn't).   Thank God.   I think we'll be moving the money out of it into something that will provide better long term growth.


I think annuities are right for some people, but if you want to provide a nest egg for your descendants, that's not a way to go about it.


Plugra

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Re: Annuities in 401(k) plans?
« Reply #4 on: June 10, 2019, 06:44:47 PM »
Quote

We just met with the TIAA rep last week.   My wife insisted that one of her accounts in her 401K was an annuity.  I had read what I could find out about it and couldn't figure out what it was, but it didn't quite seem like an annuity.

Thankfully it wasn't.  It was a fund with a minimum payout (but lower earnings to compensate for the reduced downside risk), that *could be* annuitized (but wasn't). 


I was reading my TIAA-CREF booklet a couple of weeks ago.  It offers a bewildering array of options for payout.  The annuity is just one of them.  I don't understand how the average retiree figures that stuff out.