Paper Offers Guide to In-Plan Deferred Annuities

A white paper from Principal discusses how in-plan deferred income annuities address risks employees face in retirement.

A new white paper from Principal walks through how in-plan deferred income annuities offered within a retirement plan help future retirees manage different risks such as outliving their savings, downturns in the market and changing interest rates.

The paper, written by Bruce Ashton of Drinker Biddle & Reath LLP, discusses longevity, investment, interest rate, withdrawal rate, inflation, cognitive impairment, health care cost and public policy change risks. “The financial services community offers a number of solutions designed to address at least some of these risks. They included professionally managed accounts, payout mutual funds, guaranteed minimum withdrawal benefit (GMWB) accounts, immediate annuities purchased at retirement, “longevity insurance (that is, a type of deferred annuity paid for at retirement under which payments do not begin until the retiree reaches age 80 or 85) and in-plan deferred income annuities. None of these solutions address the last two risks—rising health care costs and public policy changes—but the in-plan deferred income annuity (a DIA) addresses all of the others,” the paper says.

“The Retirement Income Dilemma: An In-Plan Solution” discusses how an in-plan deferred income annuity addresses more of these risks than other products available today, and what steps a plan fiduciary should take to research options and make a prudent decision.

The paper is available in condensed and full versions. It also includes checklists for plan sponsors to use when researching different in-plan products and providers.