Annuities have gained a tremendous amount of popularity over the last 3 years. After the financial collapse of 2008, many Americans woke up to realize that their 401k looked more like a 201k. Moreover, it was this collapse that exposed the holes in the 401k system for the first time. In particular, the lack of any guarantee of what you put it won’t go down, and more importantly, the complete lack of guaranteed lifetime income. The 401k, compared to its predecessor the pension, seemed quite inferior after one of the largest market crashes in 50 years.
Fast forward four years later to 2012, and now numerous large 401k plans have finally wised up and added annuities to their 401k offerings. One new company to announce the addition of annuities to their multi-billion 401k plan is red-hot Southwest Airlines. The “out of 401k plan platform” is the first annuity to ever be offered for Southwest’s 6000+ participants. This new platform will include fixed annuities, SPIA’s (single premium immediate annuities), and a longevity annuity.
We are very optimistic to think that many more smart companies like Southwest will enable their loyal employees to gain a contractual lifetime income with an annuity in their 401k. It is just a shame it took something like 2008 for these plans to finally realize how powerful and smart annuities are for qualified money.