A movement is afoot to provide retirees with more steady income for life.
Two of the biggest money managers — Fidelity Investments and State Street Global Advisors — are pushing changes that could give tens of millions of 401(k) plan participants an option for consistent income through the use of annuities, The Wall Street Journal reports.
Savers in these plans would be able to convert all or part of their savings to annuities. This would provide the savers with a stream of income throughout retirement that is not subject to the ups and downs of the stock market.
The WSJ says State Street Global Advisors — the fourth-biggest asset manager in the world — is in the process of introducing a product that lets savers convert part or all of their 401(k) balance to an annuity in their target date fund.
Fidelity plans to roll out similar annuity options next year, according to the WSJ. The paper says such changes at Fidelity could offer a new retirement-savings option for 41 million workers and retirees in the U.S.
For some time, many experts have advocated giving workers the choice of annuity-type products in 401(k) plans and similar retirement plans.
Earlier this year, the Insured Retirement Institute announced it would use 2023 to promote the use of such lifetime investment products in retirement plans.
The WSJ notes that in 2019, Congress passed a law to make it easier for 401(k) plans to include annuities, but most companies have been reluctant to pursue the option thus far. Annuities can be more expensive than other options in a 401(k) plan, the WSJ says.
Annuities are one tool people use to safeguard their retirement income. As Money Talks News founder Stacy Johnson has explained:
“Annuities are investments offered by insurance companies that allow your money to accumulate, then convert it into a monthly income for a certain period of time, or for life.”
As with any financial products, annuities have their pros and cons. Stacy talks more about annuities — and whether they might be right for you — in “Considering an Annuity? Now’s the Time to Act.”
