By Jon Dize, CFRE
Director of Development
According to a recent article in the Wall Street Journal, “Vanguard Group plans to start letting workers buy an annuity within a new 401(k) target-date fund.” Vanguard is the nation’s largest target-date fund and plans to roll out the new fund sometime in 2026 and will make the option available to older workers and retirees.
As the article notes, one goal of adding an annuity is to help retirees replicate the predictable monthly income of an old-fashioned pension plan (remember those?). In addition to predictable income, annuities don’t change if stock market or gold prices decline.
As a downside, annuities may have higher fees, more complex rules, and lower overall returns compared to traditional stock-based plans. That is the classic investment trade-off: trading higher returns for steady income.
Regardless, if you have funds with Vanguard, we wanted to provide this brief summary because other management and IRA firms may follow Vanguard’s lead and offer similar plans soon and you may be asked to consider the option.
As an additional alternative to these for-profit annuity options, many nonprofits, including Worship Anew, will sponsor Charitable Gift Annuities that can offer similar secure annual income, coupled with a charitable gift, tax-advantaged treatment, at possible above-market rates.
As we always caution, please talk to your investment and tax adviser before considering potential annuity investments to ensure they fit your unique needs, goals, and risk tolerance.