Create a trusted stream about retirement Income is one of the most important elements of one’s financial plan. A giant in the retirement industry says it now has a new way for retirees to meet this important challenge.
Honest Investment plans to launch a new product next year that will allow individuals to convert part of their employer-sponsored retirement plans into Annuities. The offering, called Direct Guaranteed Income, will allow participants 401(k) and 403 (b) plan to turn their retirement savings into a guaranteed retirement income stream similar to pension payments.
Fidelity’s product is not the first of its kind. Since its adoption SAFETY Act In 2019, the financial services industry began offering annuities in retirement plans to meet the growing demand for annual income streams.
It is important to note that annuities are often biased because of their high cost and complex structure. One Financial Advisor can help you determine if annuity is an appropriate investment option for you.
New products of Fidelity
Fidelity says its Guaranteed Income Direct will allow employers to provide an immediate income annuity to employees through an insurance company of their choice. Fidelity will offer digital tools through its employee benefits portal to help workers determine the right level of guaranteed income, Fidelity said in a press release announcing the new product.
Program participants will have the ability to convert any retirement savings into an annuity that will act like a “personal pension,” the company said. Individuals can convert savings regardless of whether the money is allocated to mutual funds, personal stocks, or other assets.
Any money that is not converted into an annuity can remain in a workplace savings plan.
“Moving from saving for retirement to living in retirement is one of the biggest transitions a person will make in their lifetime, and one of the top challenges individuals face in the process. This transition is about making sure they have enough predictable income to cover their essential expenses,” said Keri Dogan, Senior Vice President of Retirement Solutions at Fidelity. in the press release.
Fidelity says the product will be available to select customers in the first half of 2022 before becoming more widely available in the second half of this year.
Annuities in Retirement Plans: A Growing Trend
Fidelity is the latest financial services company to add an annuity option to its retirement plan.
Black stonesthe world’s largest wealth manager, added a target date A strategy known as LifePath Paycheck allows retirement plan participants to purchase a lifetime income stream using their retirement savings.
Meanwhile, Announced nationwide last month it partnered with Capital Group to launch a similar product that packages target date funds with lifetime annuities.
Their annual increase in retirement plans is a by-product of the SECURE Act, the comprehensive retirement law signed into law in 2019. The law has helped plan funders integrate them into make retirement plans easier by identifying ways in which sponsors can respond fiduciary duty while providing guaranteed income streams to participants.
This change also comes at a time when traditional pension plans are becoming increasingly rare.
According to the Bureau of Labor Statistics, only 15% of private workers have access to both definite benefit (pension) and definite contribution plan to retire in 2021. Meanwhile, only 3% have access to defined single benefit plans. That’s a significant drop from 1975 when about 74% of private workers were entitled to a defined benefit pension, according to Labor Department figures.
With Social Security faces significant funding challenges Since that could reduce future benefits by 25%, retirement savers will likely be looking for new ways to add a reliable source of income to their financial plans.
Conclusion
Annuities have become an increasingly popular form of offering in retirement plans since the passage of the SAFETY Act. Fidelity Investments will launch its own annuity option in 2022 that will allow 401(k) and 403(b) participants to convert their retirement savings into a guaranteed lifetime income stream. However, given its high cost and complex structure, annuities are not a suitable solution for all retirees. One Financial Advisor can help you determine if they should be included in your retirement plan.
Tips for managing your retirement savings
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Have you saved enough? Experts say your expenses in retirement will be about 80% of what they were before retirement. SmartAsset’s retirement calculator can help you determine how much you’ll need during your golden years and whether you’re on the right track.
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A financial advisor can be a trusted partner as you plan for retirement, helping you determine what your needs are and how to meet them. Finding a qualified financial advisor is not difficult. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches for free to decide which is right for you. If you are ready to find an advisor who can help you achieve your financial goals, start right now.
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