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All About Annuities » Should Employers Default Workers 401(k)s Into Annuities?

Should Employers Default Workers 401(k)s Into Annuities?

Should Employers Default Workers 401(k)s Into Annuities?
News from Forbes:

Back in the 1970s, the assumption was that most employers would provide traditional pensions that paid out income over a retiree’s lifetime, but most employers aren’t willing to do this anymore. In fact, two-thirds of Fortune 500 companies that offered pensions to new employees in 1998 no longer offer these benefits today. And three-quarters of them are engaged in derisking strategies such as offering lump sums to separated workers in lieu of lifetime payouts and even terminating pension plans altogether.

That leaves employees to rely on workplace 401(k) plans—originally meant as supplemental savings plans and not designed to provide lifetime income, aka an annuity. Only 12% of 401(k) plans offer lifetime income distribution options, and of those that do, there is only a 5% employee take-up rate.

“The very word ‘annuity’ is poison,” said Josh Gotbaum, a guest scholar at the Brookings Institute and former director of the Pension Benefit Guaranty Corp., speaking at the Bipartisan Policy Center’s “lifetime income” conference. He noted that the title of the event, “Making Your 401(k) Last: The Challenge of Lifetime Income in Defined Contribution Retirement Plans,” left out the tainted word. But annuitizing at least part of your retirement nest egg makes sense, and the experts hashed out ideas to help workers stretch out their retirement income over their life…………… continues on Forbes

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