By JLP | March 9, 2011
Yesterday’s Wall Street Journal had a special retirement planning section. One of the articles was about using annuities during retirement to boost income and decrease volatility. One of the stable annuities for doing that is a fixed immediate annuity. I don’t have a problem with fixed immediate annuities because they are usually inexpensive, easy to understand and can offer retirees income stability while their other assets are invested more aggressively.
The article also mentions adding a variable annuity to the retirement income mix, adding a rider (for an additional .5% to 1% a year) that gives the annuity holder a set percentage of the original investment, and investing the subaccounts as aggressively as possible since the retiree has the rider. No where does the article is mention surrender periods. I’m skeptical of this idea.
Anyway, the article ends with this paragraph:
Variable annuities are beginning to make an appearance in some 401(k) plans, and Great-West says it has gotten a lot of interest in its 401(k) annuity offering, launched last year.
Great-West is an insurance company. I remember reading not too long ago that people were confused by their 401(k) plans because they offered too many choices. I can’t imagine that offering them a variable annuity is going to make the choices any easier. I also don’t like the fact that Great-West is most likely making a lot more money off the variable annuity than they are the other investment choices. Looks like it could be a conflict of interest.
Thoughts? Do you like variable annuities inside a 401(k)?
NOTE: As is typical whenever I post anything that is skeptical of variable annuities, I’m sure this post will draw the ire of insurance salesmen. I don’t have a problem with you leaving comments that are beneficial. That said, let’s keep it on the mature level.