Are Annuities Filling the Void Left by Lack of Pension Plans?

In January 1981 the birth of the 401(k) began to change the face of retirement planning forever. Since that time, the traditional pension plans, with their guaranteed income options, have all but disappeared. In their place, the individual has now become responsible for driving their retirement savings through a company sponsored 401(k) plan and any other means personally available. While most 401(k) plans may include some company matching funds, still, in order to qualify for any company input, it requires that the first contribution be made by the participant. And within these plans, the worker never has a growing guarantee of retirement income, based upon years of service, but has an account balance with a limited number of investment choices. At retirement this nest egg, whatever size it has become, is then to be managed by the individual in a way to make it last for the rest of their life. When a retiree rolls their 401(k) into a personally managed IRA account, and then purchases an annuity within that IRA, they have the opportunity to restore a number of the guarantees that pension plans used to offer, such as guaranteed lifetime income. They can even provide that their surviving spouse or beneficiaries will be able to maintain this IRA account in a tax favored manner after their death. Perhaps the enormous public interest in fixed annuities, which includes indexed annuities, is partially a desire to return some of those lost assurances our grandparents' pension plans provided. If the individual is now the driving force behind their own retirement, we need to make sure that they can maintain these familiar and guaranteed options that only annuities provide.