From the July 2009 issue of Boomer Market Advisor • Subscribe!

401(k) insurance?

Insure your 401(k) - the case is no doubt there, but how? The Wall Street Journal reports insurers want to allay fears by collaborating with each other to spread the risk. Even for all of the potential problems, many insurers argue that these plans are necessary for people age 50 and over, who may not have time to recoup big investment losses, writes Leslie Scism for WSJ.

But, "Some consultants and academics maintain that the 401(k)-guarantee business may not take off among the nation's biggest employers unless the government gives it a shove," she continues. "Alicia Munnell, director of the Center for Retirement Research at Boston College, says the cost of a meaningful guarantee - one promising an annual rate of return of, say, 4 percent to 6 percent - would be prohibitive for the private sector and would bump into limits on insurers' capacity for transferring risk to other players through their hedges. Simply put, if the guarantees get too big, and promise too much, there aren't enough hedges out there to protect all that money."

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