New 401(k) Plans with Guarantees

WITH PENSION PLANS on the fast track toward extinction and stock market volitilaty, companies are exploring another alternative that will provide their employees with protection against market downturns and guaranteed income at retirement: annuities (or annuity - like features) in their 401(k) plans.

When choosing to invest this way, employees will have the ability to direct all or part of their contributions into annuities or annuity type mutual funds, as opposed to just mutual funds, which are the primary 401(k) investment choice.

So why are employers introducing these to their 401(k) plans?

Principal protection even if market losses completely deplete the account.
Guaranteed increases, during the accumulation years, in the amount that will be used to calculate income.
Potential Growth from market gains, which are locked in annually.
A guaranteed minimum of income every year of life, even if market losses completely deplete the account.
Protection of retirement income from market downturns. (In fact , individuals may choose to remain invested in the market longer , and/or more aggressively , than otherwise, due to protection afforded by the guarantees.)
Access to principal-with no loss of control.
Wealth Transfer-any amount remaining in the account after the retiree dies may be passed to heirs.

Annuity Rates and Benefits Risk and Reward Video Guaranteed Income for Life Riders

401(k) In-Service Distribution Rollovers

Contrary to popular belief, you may not have to keep all of your retirement savings in your employer-sponsored retirement plan, such as a 401(k) plan, until you change jobs or retire. Instead, you may be allowed to take an in-service distribution, or roll over a portion of your retirement assets to an IRA. This may allow you to more actively manage your retirement savings before retirement - while you continue to work and make contributions to your employer-sponsored plan.

As long as you directly roll these assets to an IRA, your in-service distributions do not result in taxable income or a tax penalty and mandatory withholding will not be applied.

Determine your eligibility first
Your ability to take in-service distributions is determined by the terms of your employer-sponsored retirement plan. The specifics of eligibility vary widely by plan - review your retirement plan documents to determine if you are indeed eligible. If you have questions, contact the plan administrator, who can help you investigate this possibility.

Consider the benefits of a rollover now, while you're still working
There are advantages to moving a portion of your retirement assets into an IRA now, rather than later. Benefits include:

Control and ownership - With an IRA, you are the account owner and have more control over your assets, free from the restrictions your employer-sponsored plan can impose.
Diversification - Many employer-sponsored plans offer limited investment options. In contrast, most IRAs typically provide a wider range of investment choices across virtually every asset class. This flexibility can help you better diversify your retirement assets to meet your individual investment goals.
Beneficiary options - Typically, IRAs allow non-spouse beneficiaries to "stretch" an inherited IRA over their lifetimes. This type of beneficiary distribution option is not available in most employer-sponsored plans, which may limit distribution choices for your beneficiaries.
Additional Guarantees - Choice of income or contract value guarantees with Annuity funded IRAs.

To learn more or if you would like to speak with one of our