Variable annuities are another way for insurance companies to hide unnecessary fees from plan participants. Many of the features when viewed over the long term are unnecessary and hurt performance. The complexity in these annuities does nothing but confuse plan participants and are might to feed their fear. In other words they help sell more insurance.

Annuities can make sense for a part of your portfolio especially as you reach retirement and you are looking for some stability to your income stream, but not in your 401(k).  The costs and issues in managing a 401(k) plan in your employees’ best interest far outweigh the need for providing annuities in any company’s retirement plan.

When you consider all the fees involved in any annuity the benefit to the investor is very small and in most cases will result in a smaller account balance. Annuities are sold based on the fear of the client. Agents and brokers make money on commissions and will sell whatever the client wants at the time. An real investment adviser is not merely a salesperson. Sometimes being in the correct investments is uncomfortable but is the best for the client.

Please comment or call to discuss how this affects you and your company.