Guaranteed Retirement Income -- Can Your 401(k) Do This?

NEW YORK (TheStreet) -- With the withering of pensions, Americans are hungry for a steady retirement income plan. Few 401(k) plans offer income-for-life options, so retirees have to implement their own asset draw-down strategy. That could be changing.

The much-maligned annuity may be making a comeback. Insurance companies that issue the products spread the investment risk over a large pool of investors, leveraging the fact that some annuity owners will die before others. But by opting for a guaranteed income, an owner forfeits withdrawal flexibility and often pays a good deal in fees. And the financial health of the insurance company backing the annuity must always be considered.

Still, "guaranteed retirement income for life" is a strong incentive for retirees, and annuities are once again gaining popularity. Sales are climbing -- not to the extent of their heyday back in the early 2000s -- but interest is rising significantly. One reason: Retirees are looking for pension-like payouts from 401(k) assets, and the government is pushing providers to offer just such a solution.

"It's the Department of Labor and the U.S. Treasury Department really pushing, emphasizing, blessing -- making it easier to have annuities inside of qualified plans, 401(k)s," said Dr. Moshe Milevsky, professor of finance at York University, speaking to Investment News during the Retirement Income Summit in Chicago earlier this month. "[But] there's a lot of shady products out there and shady characters and miss-selling -- people who purchased them who shouldn't have purchased them. And that has to be cleaned out. If the industry can't do it themselves, then the regulators will have to do it."

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