Two pieces of news provide a flicker of hope amid the doom and gloom.
By Cyril Tuohy
Variable Annuity Life Insurance Co. (VALIC), looking to offer future retirees more income options while still enrolled in an employer-sponsored retirement plan, announced it has launched a deferred income fixed annuity for 401(k), 403(b) and 457(b) deferred compensation plans.
The annuity, branded as IncomEdge, offers employed participants the opportunity to arrange a fixed income stream they can rely on once they retire.
“IncomEdge empowers organizations to provide the opportunity for employees to purchase a lifetime guaranteed income stream within their plan, using tax-deferred, in-plan retirement savings or rollovers,” Jana Greer, VALIC president, said in a statement.
VALIC is a retirement plan provider for health care institutions, K-12 school districts, higher education institutions, governments and other nonprofit organizations.
Employees are free to choose the IncomEdge annuity as long as their anticipated retirement is at least one year away, the company said. Annuitants can choose from among several payout options, the company also said.
Options include receiving lifetime income only, lifetime income for a fixed number of years, lifetime income with an installment refund, lifetime income with a cash refund and a joint life option covering two people, according to product details on the company website.
Payments begin at least 13 months after the employee buys the annuity but before the age of 70 ½, VALIC said.
Calls for more income options within retirement plans have grown louder. Income disclosure laws under debate in Congress would even give employees an estimate of how long their assets would last in retirement using different actuarial assumptions.
In the wake of the 2008 financial crisis, surveys show many Americans feel underprepared with regard to funding a comfortable retirement. At the same time, Americans express broad support for investment choices that provide guaranteed income.
Income from the annuity would supplement income from other investments, defined contribution plans, defined benefit plans and Social Security.
For years the retirement industry, backed by powerful mutual funds, has spent millions of dollars and thousands of hours helping workers define the contribution to their retirement nest egg, in the form of dozens of investment choices at all sorts of contribution levels.
Offering annuities within employer-sponsored retirement plans is an attempt at altering the equation and shifting the debate to defining the distribution that retirement assets in an employer-sponsored plan such as the popular 401(k) or 403(b), can provide.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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