How can Longevity Annuities supplement your 401K?

A new twist in retirement planning is taking hold: financial services companies are offering immediate annuities and longevity insurance—a deferred annuity—as an option in 401(k) plans.

The trend of using annuities and longevity insurance has heated up over the last few years as more retirees and those approaching retirement search for income generating investment solutions. “With longevity insurance or an immediate annuity, the client is saying they want to take payments in the form of an income stream either now or at a later point in time.

Adding a guaranteed income product to the mix at both ends of the spectrum—while both saving for retirement and then taking income while in retirement—can help decrease investment risk while, potentially, increasing investment return over the longer term.

While group annuity platforms have been a mainstay of the 401(k) and defined benefit world for some time, the new approach taking hold now is “treating a fixed annuity or longevity insurance as a distinct investment option [in 401(k) plans] and as a platform unto itself.” For instance, the plan participant could choose from an array of mutual fund options in a plan and also be able to allocate a certain portion of their money to the insurance contract.