Opinion: Now that annuities can be part of your 401(k), here’s how to make them more palatable
January 7, 2020 by Andrew G. Biggs
The Secure Act passed by Congress at the end of 2019 is the biggest change in U.S. retirement savings policy since the Pension Protection Act in 2006. The Secure Act aims to expand retirement savings opportunities, give retirees more freedom on when to withdraw their retirement savings from IRA plans, and expand access to annuities in 401(k) plans.
Annuities might be the most important part of the new law, but also the most challenging. Annuities offer valuable protection against outliving your savings. But annuities also can be very complex and difficult for consumers to compare, making it harder for retiring employees to ensure they purchase an annuity that fits their needs at the best possible cost.
I think every retirement plan should offer basic but high-value annuity options to give retirees more peace of mind in retirement. For more complex annuities, the insurance industry, state insurance regulators and retirement researchers should work to inform Americans how to choose the best plan, just as these same groups have improved the buildup phase of 401(k)s through increased use of automatic plan enrollment and low-cost target date investment funds.