The transparency of annuity fees and costs is a critical issue in retirement planning. It directly impacts employees’ confidence and trust in their retirement plans. Annuities, often marketed as a secure way to ensure a steady income stream in retirement, can come with various hidden fees and charges that are not always fully disclosed to investors. This lack of transparency can lead to employees inadvertently paying higher fees than anticipated, significantly reducing their overall retirement savings. When employees are not fully informed about the costs associated with their annuities, they may feel skeptical and distrustful of the products and the companies offering them. They might question whether they are truly getting the best value for their investment.
Moreover, the concern about transparency extends beyond just the financial aspects; it also affects employees’ perception of the company managing their retirement plans. When plan sponsors and annuity providers do not clearly communicate all the associated costs and fees, it fosters uncertainty and mistrust among employees. This can lead to a reluctance to participate in such plans, ultimately undermining the effectiveness of retirement savings programs. Ensuring transparency in fee structures helps employees make informed decisions and builds trust and loyalty, encouraging more proactive participation in retirement planning. Transparent communication about fees and costs is essential for empowering employees to make the best choices for their financial futures and for maintaining the integrity and reputation of the retirement planning industry.
At the conclusion of a TPSU program held at Wake Forest’s downtown campus in Charlotte, Fred Barstein conducted an insightful interview with Jean, the director of finance at her company employing approximately 230-240 individuals. Jean raised significant concerns regarding retirement income products, particularly annuities. During the interview, she expressed apprehensions about the inadequate disclosure of annuity costs and the long-term financial stability of annuity providers. Her primary concern centered around the transparency of annuity fees and costs, which she believes could disadvantage employees seeking to secure their retirement futures. Jean highlighted the complexity and opacity of annuity fee structures, including hidden charges and administrative fees, which she fears could undermine the overall value retirees receive. Despite regulatory safe harbor provisions, she remains skeptical about the true transparency and reliability of the companies offering these financial products. Jean stressed that the lack of clear, upfront information about fees not only fosters mistrust but also leaves employees feeling uncertain about whether they are receiving the best possible outcome for their retirement savings.
Read the Full Transcript Here:
Fred Barstein:
This is Fred Barstein in Charlotte, where we’ve just completed a TPSU program at Wake Forest downtown campus. And I’m here with Jean. Welcome Jean.
Jean:
Hi. Thank you.
Fred Barstein:
And okay if we ask you a few questions?
Jean:
Yes.
Fred Barstein:
Okay, great. Thank you. But before we do, tell us a little bit about yourself, your role and the size of your company.
Jean:
Okay. I’m director of finance and we have around 230/240 employees.
Fred Barstein:
Great. So during the program, we had a lot of discussion about retirement income, the need for something like that, but a lot of people including yourself, voiced concerns. So what was your concerns?
Jean:
My concern basically is around annuities. I agree with the concept of the annuity. However, I feel like a lot of people get annuities and they’re not informed on the true cost of the annuity. And then as far as a retirement vehicle, deferred annuities and so forth, I have concerns. And I feel like some of our employees would have concerns about the financial viability of the companies that you have the annuities with.
Fred Barstein:
Because it’s such a long term.
Jean:
Correct. Correct. It’s very long term. And what are the guarantees that when their retirement comes, when their golden years roll around, that that money is going to be there for them?
Fred Barstein:
Right. So I know that there’s a lot of companies saying, well, as long as we get safe harbor, we’re fine. But even if they’re safe harbor, you’re concerned on behalf of your employees.
Jean:
Correct. Correct.
Fred Barstein:
To do it just even if you don’t have that liability. And you also brought up something about the lack of transparency, right?
Jean:
Yes. Yes.
Fred Barstein:
What is your concern about that?
Jean:
It’s been my experience in looking at these kinds of products that the companies that offer them tend to not disclose the true fees involved and the true costs. And I feel like that’s another concern that I have as far as steering employees to invest in these things.
Fred Barstein:
It’s also probably a concern of yours with everything not having transparency.
Jean:
Well, very true. I mean, our whole plan, and of course in recent years that they’re being forced to be more transparent. And so that’s a good thing.
Fred Barstein:
Right. And what does lack of transparency make you feel about the company you’re working with?
Jean:
As far as our profit sharing plan? Well, you just have the sense, and it could be not true, but because they’re not transparent and because of the way they charge these fees, there could be manipulative that you don’t think you’re getting the best bang for your buck, which may or may not be true, but you just don’t know.
Fred Barstein:
So if you’re not sure, you generally will tend to think, well, I’m probably not.
Jean:
Right, right.
Fred Barstein:
Like, oh yeah, I’m getting a great deal.
Jean:
Right. Right, exactly.
Fred Barstein:
So lack of transparency does not make you feel good about it.
Jean:
It does not.
Fred Barstein:
No, I agree. Totally. So final question, a couple of things you learned that you want to try to take back to your company and implement.
Jean:
Well, I think that the networking is great. To have people who are dealing with the plans from other companies and get other perspectives. And so the whole idea of the auto enrollment is a foreign concept for our firm. So I think that’s something that we need to consider. So that’s my number one takeaway.
Fred Barstein:
Right. The industry thinks everybody’s auto enrolling and the [inaudible 00:03:51] research shows it was like 36%.
Jean:
Right. Which I didn’t know that, but we had not. It’s not something that we had brought up before, but I think it’s a really good… I like the concept of it, and I think it’s a really good tool to get people to save.
Fred Barstein:
Very good. Well, thanks for your time. I know you are a reluctant participant, but you’ve done great.
Jean:
All right, well thanks.
Fred Barstein:
And thank you for watching 401kTV. Stay tuned.
