Congress is trying to pass new rules on 401(k)s. There are some good reforms in the current legislation, but one glaring red alert is the increased role of annuities planned for 401(k) accounts in the bill.
Annuities can be fee-sucking, performance killing traps enriching the companies that sell them, rather than the customers who buy them.
Anne Tergesen reports on some of the drawbacks of annuities:
Annuities aren’t often used in 401(k) plans, in part because employers worry that if they pick an insurance company that ends up going bust, the 401(k) participants will sue the employer.
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Annuities have some drawbacks. For example, they offer less potential for outsize gains than stocks or funds. And once you hand over your money to an insurer, you may not be able to leave it to heirs or get it back without paying surrender charges or sacrificing at least some of the guarantee you have paid for.
Read more here. A portfolio of stocks and bonds focused on generating income and avoiding risk will serve you and your family far better in retirement than any annuity ever could. Beware.
