Fidelity Rolls Out Immediate Income Annuity for Participants
A new solution allowing employees to convert all or a portion of their retirement savings—from a 401(k), 403(b) or 457(b)—into an immediate income annuity recently became available nationally from Fidelity Investments.
Fidelity announced on Jan. 25, 2024, the broad availability of Guaranteed Income Direct, providing consistent, pension-like payments throughout retirement.
“A key challenge for employees as they transition from saving for retirement to living in retirement is ensuring there’s enough predictable income to cover essential expenses,” said Keri Dogan, senior vice president, Financial Wellness and Retirement Income Solutions at Fidelity. “Many people feel anxious about how to generate income in retirement and want to reduce the risk of outliving their assets. Through solutions such as Guaranteed Income Direct, individuals can move into retirement with a greater sense of financial security, knowing they’ll be better able to cover their everyday expenses.”
Guaranteed Income Direct allows employees to set up pension-like payments by purchasing an immediate income annuity through an insurer selected by an employer. Currently, MetLife, Pacific Life, Prudential Financial, and Western & Southern Financial Group are available on the platform, with additional insurers to be added in the future.
Prudential, for example, recently launched Prudential SimplyIncome—a new single-premium immediate annuity, or SPIA—within employer-based retirement plans administered by Fidelity Investments.
“Prudential SimplyIncome provides a new decumulation option for plan participants looking for a predictable retirement income solution, delivered through a streamlined, tech-forward experience on Fidelity’s Guaranteed Income Direct platform,” said Ann Nanda, head of Future Growth Initiatives and Distribution Enablement at Prudential Retirement Strategies.
Fidelity research shows the number of retirees and pre-retirees deciding to stay in plan past their retirement date has continually increased over the past 10 years, with 65% of participants expressing interest in having guaranteed income options in their workplace plans. For employers, the feelings are mutual: 81% of plan sponsors would prefer to give retirees the flexibility to stay in plan and withdraw assets throughout their retirement years.
Fidelity’s announcement caught the attention of Annuity Research & Consulting’s Michelle Richter-Gordon, who addressed it during a recent webinar focused on critical information for annuity fiduciaries.
Richter-Gordon, who describes herself as an advocate for fiduciary behavior and an advocate for insurance solutions, said retirement plan advisors and consultants serving plans that use a a single premium immediate annuity (SPIA) marketplace platform are responsible for evaluating the services and the providers offered under that marketplace. “If that marketplace itself is not performing carrier due diligence, then the advisor or consultant on that plan relationship should be documenting its analysis of creditworthiness of those carriers that it allows its plan sponsor clients to use under that service,” Richter-Gordon said. “Insurance can be very useful, and a person who is acting as an ERISA investment advice fiduciary must do creditworthiness analysis.”
• CLICK HERE to read this article as it appears in Issue 1 2024 of 401(k) Specialist Magazine.
SEE ALSO:
• What’s Behind Record Fixed-Rate Deferred Annuity Sales
• Next 12 Months Could be Tipping Point for In-Plan Annuities
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
