Understanding the Unique Features and Risks of Annuities Within Employer's Retirement Plan - Enlighten567

An annuity is a financial product that provides a guaranteed income stream for a set period, typically for the life of the annuitant. Annuities have traditionally been sold to individuals as a way to provide a source of income in retirement, but in recent years, there has been a growing demand for annuities within employer-sponsored retirement plans.

According to a new report from LIMRA, demand for annuities within employer-sponsored retirement plans is expected to “grow exponentially” in the next two years (1). This is due to several factors, including:

• The current economic environment.
• The retirement income needs of baby boomers.
• The desire for guaranteed income streams.

The Need for Retirement Income Is Real

The LIMRA report predicts that this demand will continue to grow in the coming years, as more and more baby boomers reach retirement age and begin looking for ways to supplement their retirement income.

The report also notes that the current economic environment, which has been characterized by low-interest rates and high market volatility, has made it difficult for many retirees to generate sufficient income from their retirement savings.

As a result, more employers are looking to offer annuities within their retirement plans as a way to help employees secure a reliable source of retirement income. According to the report, 30% of employers currently offer annuities within their retirement plans, and this number is expected to grow significantly in the coming years.

Different Types of Annuities

Several different types of annuities can be offered within employer-sponsored retirement plans, including fixed annuities, variable annuities, and indexed annuities. Each type of annuity has its own unique set of features and benefits, and employers will need to carefully consider which type of annuity is best suited for their employees.

One potential benefit of offering annuities within retirement plans is that they can help mitigate the risk of running out of money in retirement. Because annuities provide a guaranteed income stream, they can help to ensure that retirees have a stable source of income throughout their retirement years, even if they live longer than expected.

Potential Drawbacks Too

However, there are also some potential drawbacks to offering annuities within retirement plans. For example, annuities can be complex products, and employees may not fully understand how they work or what their benefits are.
Additionally, annuities can be expensive, and some may have high fees and commissions.

Do Your Research

As employers and employees alike seek ways to secure a reliable source of retirement income, annuities may become an increasingly popular option.
Your financial professional can help you determine whether annuities make sense for your personalized strategy.

Expand your understanding without any cost—attend a nearby educational seminar or webinar and gain valuable insights.

(1)“Prediction: The in-Plan Annuity Market Will Grow Exponentially over the next Two Years.” LIMRA.Com, www.limra.com/en/newsroom/industry-trends/2023/prediction-the-in-plan-annuity-market-will-grow-exponentially-over-the-next-two-years/.

ℹ️ Annuities are long-term insurance contracts and there is a surrender charge imposed generally during the first 5 to 7 years that you own the annuity contract. Withdrawals prior to age 59-1/2 may result in a 10% IRS tax penalty, in addition to any ordinary income tax. Any guarantees of the annuity are backed by the financial strength of the underlying insurance company.