Beware the Big "LIE"

John Robinson |


The Lifetime Income for Employees Act will be Harmful to 401(k) Plan Participants

By John H. Robinson (July 10, 2022)

My latest article, Should Consumers Annuitize at Normal Retirement Age? has been published in Advisor Perspectives.  The backstory of why I wrote the article is that there has been a fair amount of published research over the past few years suggesting that retirees should irrevocably transfer their retirement savings to insurance companies in return for a lifetime income annuity instead of managing their retirement portfolios themselves. However, some of the most vocal and prolific researchers who have reached this conclusion work for the insurance companies that sell annuities.  Per my AP article and our underlying research paper, I am not so sure the advice they are giving is either objective or sound.

In a surprise to no one, the insurance industry, armed with its supporting academic research, has been lobbying congress to make lifetime annuitization a mandatory option in 401(k) plans. Its efforts (and its lobbying money) have been paying off.  For example, the 2019 SECURE Act contains an obscure provision requiring 401(k) plan administrators to provide annual single and joint life annuity estimates on plan participant statements.  The logistics of implementation are still fuzzy, but some large 401(k) providers have signaled that they will begin providing this data on participant statements in 2022.  This isn’t necessarily a bad thing, except that no effort has been made to educate plan participants about the drawbacks of annuitization.

More alarmingly, an industry-backed bill, the Lifetime Income for Employees Act (the "LIE Act" for short?), would require annuities to be offered as an allowable Qualified Default Alternative.  The bill would also allow deferred annuities to be an investment option for up to 50% of a participant's investment allocation.  It is challenging for me to come up with a worse long term investment planning strategy than forcing participants to permanently lock up their savings in penalty-laden, low-yielding, illiquid investments.


Related Reading:

Lifetime Income for Employees Act (

Annuities could soon qualify as a default investment in 401(k) plans (CNBC)

Your 401(k) Statement Will Soon Have Lifetime Income Estimates. What to Know. (Barron''s)

The Secure Act Requires Your 401(k) Statement to Show Monthly Retirement Income. You Could Be in for a Surprise. (Barron’s)


John H. Robinson is the owner/founder of Financial Planning HawaiiFee-Only Planning Hawaii, and Paraplanning Hawaii.  He is also a co-founder of fintech software-maker Nest Egg Guru.



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