I Want an Annuity and So Should You

By John Hilton

This summer I learned that a previous employer was dissolving their business.

Since this employer also served as the plan sponsor for my main 401(k), otherwise known as 90 percent of my nest egg, I needed to make decisions. I had left my money in the plan because it came with remarkably low fees.

But with a little bit of legwork, I found a similar plan. So we loaded up several Brink’s armored trucks and moved my money in July.

Things began swimmingly. After four weeks, my account was up about 3 percent. I began looking at retirement condos in Puerta Vallarta. Alas, it didn’t last.

Last week’s market wipeout ended with me down 1 percent. In just a couple days, my handsome gains were vacated and I was in the red.

So when I think about how much I’m relying on the market to deliver my lavishly fantasized retirement, I get a tad nervous. After all, a calamitously timed downturn could leave me repeating three words daily – “Welcome to Walmart” – when I plan to be learning French and playing in a weekly golf league.

Stability is an important part of a balanced nest egg. It’s easier to stomach gambling with some of it if you have the peace of mind knowing the rest of it is safe and secure.

The Government Accountability Office feels this way, recently releasing a report calling for rules changes to make it easier for plan sponsors to offer annuities.

As it stands, many employers are deterred from offering annuities in their plans because companies don’t want to be found liable in the future if an insurer or annuity company stops paying claims.

When I started at InsuranceNewsNet in 2015, I didn’t know much about annuities. Now I plan to devote 20 to 25 percent of my nest egg to buying one. My father lived until 89, and his sisters into their 90s. And it wasn’t because they lived healthy lifestyles.

It’s possible I have good genes. While a blessing, it makes it hard to plan for retirement if could live anywhere from 70 to 100.

“Every day until 2030, 10,000 baby boomers will reach age 65,” said ACLI President and CEO Dirk Kempthorne in a statement. “Without the guaranteed lifetime income that annuities provide, many will be unprepared for retirements that could last 20, 30 years or more.”

I couldn’t agree more. It would provide so much peace of mind if I knew I had a $500 check coming in monthly. While it won’t cover all possibilities, it provides something, and that something will never stop paying.

The way we pay for retirement continues to evolve from pensions and Social Security to self-directed 401(k)s and Social Security.

I am hopeful that the government can find a way to make it easier for annuities to gain a foothold in our 401(k)s.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].