Advisors Cast a Wary Eye on 401(k) Annuitization

By Allison Bell

September 12, 2022 at 03:11 PM

Share & Print

Many registered investment advisors think that encouraging employers to annuitize typical 401(k) plan participants' assets is a bad idea.

About 75% of the 197 advisors who participated in a voluntary RIA poll organized by RetireOne in May agreed with the statement that offering annuitization as a default option for 401(k) plans at retirement may cause more harm than good.

About 64% agreed with the statement that offering annuitization as the default option could "limit advisors' ability to advise on all client assets and provide holistic advice," and 68% strongly disagreed with the statement that "annuitization as the default option for 401(k) plans at retirement will give American savers the needed peace of mind to spend confidently."

RetireOne runs an annuity and insurance product exchange aimed at fee-based advisors.

Financial services organizations of all kinds worked together for years to get the Setting Every Community Up for Retirement Enhancement Act — the Secure Act — up and running.

One of the Secure Act provisions that was especially popular with life insurers provides legal protection for retirement plan sponsors that go through a careful process to choose in-plan annuities, to help the participants convert plan assets into lifetime streams of income.

The RetireOne survey results suggest that the new default in-plan annuitization mechanisms may face objections from many RIAs out in the field.

(Image: kan chana/Shutterstock)