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annuity in target-date fund?


Peter Gulia

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Recently, the Employee Benefits Security Administration and the Internal Revenue Service released guidance that makes it feasible to use an annuity as an aspect of a target-year investment fund.

Has any investment manager announced a product?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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I haven't heard of any.

I think the concern for plans, and probably for target date fund providers, is the question of what happens if the insurance company folds before the participants who have dumped their money into the annuity investment retire. Who's left holding the fiduciary bag and gets sued big-time?

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More practical question is why would a plan fiduciary add an annuity product to a 401k plan for active participants because the cost of the annuity benefits can add 1 % or more to fees which simply reduce the account balance that compounds tax free. Don't need a tax deferred wrapper in a tax deferred plan. Its better for participants to invest in low cost funds with long term investment goals and purchase an annuity if it is needed at retirement instead of having a small amount invested in an annuity contract that will pay a minimal monthly benefit.

mjb

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