The Employee Retirement Income Security Act (ERISA) just marked its 40th birthday. It was with high hopes that President Gerald Ford, on Labor Day 1974, signed it into law as a consumer protection law. Today, after several amendments, ERISA sets standards of protection for participants in most pension and health plans in the private sector. A recent Pensions and Liability article on ERISA explored the 40-year history of the law that was supposed to protect consumers, but is now motivating employers to adopt retirement plans providing a less secure future for employees.
What’s the problem? ERISA has resulted in employers shying away from the investment risk of defined benefit plans and moving to defined contribution plans, like your 401(k), where employees bear the investment risk of their retirement futures.
Since defined contribution plans focus on retirement asset accumulation and not retirement income as defined benefit plans do, it is important that you take control of your retirement income plan. One important way you can do that is by considering a Fixed Index Annuity (FIA). An FIA allows you to set aside a principal amount that will remain protected in the event of a market downturn, with capped interest growth if the market rises. An FIA will protect your nest egg and give income options providing a retirement income you can depend on for life.
Visit our Smart Buyers Checklist to ensure you are asking the right questions when purchasing an annuity and preparing for your retirement.