Annuitize

A very good article in Forbes magazine discusses the many downsides of using group annuity contracts as a wrapper for 401k plans. This is not to be confused with 401k or defined contribution plans that offer an annuity option within their plans or an annuity option outside of the plans to participants who are retiring or leaving the company. In fact, most of the group annuity wrappers provide no ability to annuitize. The practice is especially common among 401k plans offered by smaller...

In general and all other things being equal, it is better to hold-off on annuitizing an existing annuity contract if possible in the current environment. First and foremost we are in a low interest rate environment, so current annuitization locks-in those low rates. Second, there is the possibility of missing out on future growth of the contract value. Yet another good annuity-related article from the Chicago Tribune. Source: Chicago Tribune Full Story

The use of annuities in 401k plans is an issue receiving quite a bit of attention lately. Experts, policy makers and industry analysts understand the clear need for guaranteed income options for people who have their savings built-up in 401k plans and individual retirement accounts (IRAs): “I think one of the top goals of the new (Obama) administration is to find a way to annuitize or at least guarantee or secure some sort of income in retirement,” said Mr. Davies. “That's really the final...

The financial crisis has resulted in renewed interest in immediate annuities which can be used to lock-in stable, guaranteed income for a lifetime. "An immediate annuity can function just like a pension , producing a predictable payout. As the "immediate' part of the name suggests, the distributions start shortly after the money is invested." Longevity risk , inflation protection, how much to annuitize, and adding annuities over time are addressed in this article. Source: Wall Street Journal...