401(k)s not suitable retirement income vehicles
Is this headline as infuriating to you as it is to me?
Corporations moved with great speed to replace the defined benefit pension with the defined contribution 401(k) plan, to reduce costs and liability. But in all that time they haven’t figured out how to deliver retirement income to their participants, a benefit that is dearly missed…
I’ve seen this lack of action firsthand when, during a focus group on a novel retirement idea, only about half the 401(k) plan sponsors in the room would even consider the idea that all agreed would help participants.
The short-term answer?
Require that all plan sponsors permit active participants to roll their 401(k) balances into an IRA. IRAs provide more retirement income choices and, starting in 2017, more protections, thanks to the new fiduciary rule.
As of now, only 20% of plans permit such roll-outs.
Could the tide be turning on reverse mortgages?
Like all ideas, the press is either hot or cold, in favor of or rejecting, good or bad, etc.
The answer is never that simple.
Reverse mortgages like other financial solutions need to be analyzed for appropriateness, deployed judiciously, and considered as part of a broader strategy.
Just as we say about income annuities, reverse mortgages don’t make your retirement, they can, however, make it better.