Money & Investing – Banks.com

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The recent stock market crash and recession are causing many to take a hard look at their finances, and their investing portfolios. And in some cases, they are wondering what can be done to reduce their risk and exposure. Not surprisingly, the answer is increasingly becoming annuities.

Annuities typically offer a fixed payment that begins in retirement and continues until death. These annuities are a source of regular income for the holder, beginning with the payment term. It’s not just individuals who are starting to looking into annuities, though. Employers are starting to add annuities to 401k plans in an effort to avoid the debacle with mutual funds when the stock market crashed. This is because, in theory, annuities — with the fixed payout — are immune to such events.

The Street reports on the rising popularity of annuities in employer sponsored 401k plans:

“Annuities in 401(k) plans were rarely discussed a few years ago,” says Robyn Credico, a senior retirement consultant at Watson Wyatt. “But in the economic downturn, employees without traditional pension plans could not retire because their 401(k) balances were decimated. With this weakness exposed, more employers are exploring ways to minimize employees’ exposure to risk, including the use of annuities.” …

“Due to a perceived lack of demand as well as shortcomings of many providers’ offerings, the market for annuities is still seen as immature by plan sponsors,” says Mark Warshawsky, director of retirement research at Watson Wyatt. “It is a cycle that can be broken by employers through the design of good distribution strategies for retirees and effective communication to make the advantages of such annuities clear to employees.”

While annuities have a ways to go before they are truly accepted as part of a retirement plan, it does look like inroads are being made. If the process of administering them could be made less complex, it might be a good move for some employees to add annuities to their retirement holdings.

Of course, it is possible to invest in an annuity without an employer-sponsored retirement plan. But if you decide to add annuities to your investment portfolio, make sure you are careful to read the fine print and get help from an independent financial or investment professional.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.