“Guaranteed Income Direct” is the name of a new retirement income product introduced today by Fidelity Investments that allows individuals to convert a portion of their 401k or 403b savings into an annuity to provide consistent, pension-like payments throughout retirement.
Scheduled to launch for select clients in the first half of 2022, Fidelity Guaranteed Income Direct will have broad availability in the second half of 2022.
With nearly eight million workers on its workplace savings platform nearing retirement, Guaranteed Income Direct addresses the growing interest among employers and employees for a guaranteed income annuity option that is connected to the company’s retirement savings plan and provides direct access to guaranteed income products.
What’s driving demand
Fidelity said in a statement announcing the new product that the increasing demand for annuities as a retirement savings distribution option is driven by several factors. First, as a growing number of employers feel increasingly comfortable having workers keep their savings within the company’s savings plan when they retire, employers feel a greater responsibility to offer their employees the ability to turn some, or all, of their retirement savings into a reliable source of steady income.
In addition, recent research indicates that 78% of workers are interested in putting some of their retirement savings into an investment option that would guarantee them monthly income when they retire and help ensure they don’t outlive their savings.
Lastly, the passage of the SECURE Act has reduced the fiduciary risk for employers and made it easier for them to provide annuities as a retirement plan distribution option.
“Shifting 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 facing individuals during this transition is how to ensure that they have enough predictable income to cover their essential expenses,” said Keri Dogan, senior vice president, Retirement Solutions at Fidelity. “Our new Guaranteed Income Direct product provides employees with a simplified option to use their retirement savings plan assets to create their own personal pension and provide them with a steady, reliable stream of income to help cover their expenses in retirement.”
Flexible and integrated
The new product enables employers to provide their workers with a straightforward option of an immediate income annuity, with institutional pricing and offered by the insurer of their choice, that is combined with support and digital tools to help workers determine the amount of guaranteed income that is right for them.
Individuals have the flexibility to convert any amount of their retirement plan savings, regardless of where their money is saved (mutual funds, etc.) to guaranteed retirement income, based on their personal needs. Any savings that are not converted to an annuity can remain in the workplace savings plan.
The entire experience is integrated with Fidelity’s employee benefits portal, which also includes education and support from Fidelity to help employees as they consider their options.
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