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Investors Creating Own Pension Plans: Spectrem

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NU Online News Service, Oct. 28, 2004, 4:15 p.m. EDT

The decline of traditional pension plans has caused many 401(k) investors to roll over their retirement into annuities, a research firm finds.[@@]

With traditional pension plans fading, investors are now creating their own pensions, in a sense, by rolling their 401(k) assets into IRA-based annuities to guarantee lifetime income, according to Spectrem Group, Chicago.

The percentage of 401(k) rollover assets placed in annuities during the 12 months ending in May 2004 quadrupled to 16%, from 4% in 2000, Spectrem found.

Annuity rollovers were most widely used by investors who were retired investors or nearing retirement age, according to Spectrem ‘s survey report, “The IRA Rollover Market 2004.”

33% of World War II generation respondents who rolled over their 401(k)s chose annuities, compared with 24% of baby boomers and 20% of generation X investors.

About 10 million individuals decided to roll over their 401(k), to the tune of roughly $362 billion in assets, during the 12 months covered by the study.