A new retirement plan solution from Lincoln Financial Group enables participants to turn 401k savings into a monthly check for life.
Lincoln announced July 15 the launch of Lincoln PathBuilder, an in-plan guaranteed income option, intended to help ensure Americans won’t outlive their savings by expanding the opportunities for lifetime income in employer-sponsored retirement plans.
The SECURE Act made it easier for plan sponsors to provide a plan design that can generate guaranteed income for their participants in retirement through the use of annuity products. As a result, employer-sponsored retirement plans can become more than an accumulation vehicle—they can provide a stream of income in retirement, so that participants have the potential to receive income regularly for the rest of their lives.
Participants appear to be receptive to the idea. Among workers currently saving in their employer’s defined contribution plan, Lincoln found 61% said they would be somewhat or very likely to contribute to a guaranteed lifetime income investment option.
“As an industry, we’ve focused on ensuring that retirement plan participants know they need to work to save enough for the retirement they envision,” said Jamie Ohl, Executive Vice President, President, Retirement Plan Services, Head of Life & Annuity Operations, Lincoln Financial Group. “And while that is the important first step in building a financially secure future, we must also now focus on helping those participants translate their savings into a monthly check that will last through retirement—because in planning for retirement, the ultimate outcome is income.”
As a result of the financial impacts of COVID-19, half of retirement savers say they are more concerned about future market volatility than they were before the pandemic. This concern is increasing awareness of products that offer guaranteed income, with a quarter of retirement savers saying the COVID-19 pandemic has made them more interested in these types of investment products.
Lincoln says that with the new solution, participants can protect their savings from market declines while also benefitting when the market goes up, because of the way the “Income Base” is calculated. When participants invest their first dollar in the Lincoln PathBuilder investment option, their Income Base—how much they have invested—is set on that date. As the market goes up, the Income Base is reset annually once a year. If the market drops, the Income Base does not go down.
Plan sponsors can add the Lincoln PathBuilder income investment option to a plan similar to the way they would add any other investment, or as part of a custom target date portfolio. With a custom target date portfolio, the account balances will automatically transition, over time, to an investment that can provide lifetime income. Participants can then choose to take this as a regular check that will last throughout their retirement to help ensure their basic expenses are covered.
Lincoln says savers utilizing Lincoln PathBuilder will always have full access to their account balance, as well as the flexibility to choose when they want to start receiving lifetime payments. The investment is fully portable.
“We are focused on helping Americans automatically transition their retirement account balances into guaranteed income for life as we create a next-generation auto feature: auto income,” said Ralph Ferraro, Senior Vice President, Retirement Plan Products & Solutions, Lincoln Financial Group. “Over the coming months, we will continue to build out our suite of Lincoln PathBuilder products, as we are committed to product innovation that meets market needs.”