Fidelity Introduces Retirement Income Solutions for Employees Who Keep Savings in Employer’s Workplace Plan During Retirement
Employees Are Increasingly Viewing their Workplace Plan as a Safe Place for Retirement Savings
Fidelity Investments, one of the largest and most diversified financial companies, announced innovative new Retirement Income Solutions for the growing population of individuals who choose to keep their savings in a previous employer’s retirement plan (e.g., 401(k) or 403(b)). With more than half (55%) of retirees on Fidelity’s platform keeping their savings in a plan past the first year of retirement, Fidelity’s first in-plan retirement solution is designed to be part of an employer’s retirement lineup and combines digital tools, mutual funds and a cash withdrawal strategy to help workers transition retirement savings into a durable income stream.
“As an industry, we’ve been very good at helping individuals save for retirement, but more emphasis needs to be made on helping them understand how to draw down their savings once they enter retirement”
There are a variety of factors driving this increased focus on retirement income among employers, including a shift in traditional industry practices. First, employers1 are increasingly comfortable having workers keep their savings within the company’s savings plan when they retire, meaning more employers now feel a greater responsibility to provide tools and resources to help employees successfully transition into retirement. In addition, employers realize that offering a comprehensive in-plan retirement income solution can improve their overall benefits package as well as help meet fiduciary obligations. Lastly, employers are leveraging the larger asset sizes to more effectively manage the costs of their retirement plans. Typically, this also means lower expenses for workers.
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“As an industry, we’ve been very good at helping individuals save for retirement, but more emphasis needs to be made on helping them understand how to draw down their savings once they enter retirement,” said Sangeeta Moorjani, Head of the Employer Experience & Retirement Solutions at Fidelity Investments.
“People work hard every day to save enough to enjoy retirement and, as a result, transitioning into retirement can often be stressful. Fidelity’s new retirement income solution taps into a shift in the marketplace — the growing trend of employees’ preference to leave savings in their former employer’s plan and employers feeling more comfortable having them leave it there,” continued Moorjani.
Complete Package of Digital Tools, Withdrawal Strategies and Investment Options
Fidelity’s new Retirement Income Solutions designed to help all employees, regardless of their level of savings, and includes three core components: a digital end-user experience, a customizable cash flow withdrawal strategy, and a suite of dedicated retirement income funds, all of which seamlessly integrate into a company’s workplace savings platform.
- Digital experience and tools provide individuals with a platform to evaluate and compare various withdrawal strategies and select the option that best suits their needs. The experience is part of Fidelity’s broader approach to engage employees throughout the entire savings and retirement journey, providing the data and information needed to help make the best decisions with their savings.
- Fidelity Managed Retirement Funds are a set of mutual funds designed to be part of an employer’s 401(k) or 403(b) plan fund line-up for retirees. The funds, which provide an age-appropriate asset allocation mix that becomes more conservative over time, are designed to complement a withdrawal and payment process that help to deliver a sustainable income stream in retirement.
- The Fidelity Managed Cash Flow withdrawal strategy is designed to complement the Fidelity Managed Retirement Funds, as well as model various systematic withdrawal payment options, and aims to provide a steady income payment strategy for individuals while maintaining a balance throughout their retirement. Payout rates increase over time and are updated annually.
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The Fidelity Managed Retirement Funds are designed to be part of an employer’s retirement plan fund line-up and used by investors at or nearing retirement who plan on withdrawing money from their retirement savings. The funds, which leverage the expertise of Fidelity’s target date investment team, are designed to deliver an age-appropriate asset allocation that evolves over time which is comprised of a diversified mix of underlying equity, fixed income, and short-term strategies.
“We believe that our edge in constructing and managing retirement income portfolios comes from our experience in implementing our investment principles and process. We apply our unique insights and research on capital markets, our understanding of clients’ financial needs, and portfolio diversification to navigate the different types of uncertainty that investors may face over the course of their retirement” said Andrew Dierdorf, co-portfolio manager for Fidelity’s target date strategies, including the Fidelity Managed Retirement Funds.
Fidelity currently offers seven Managed Retirement Funds allowing investors to select a fund that aligns with their birth year. Funds are designed for investors age 60 and older who turned (or will turn) age 70 in or within a few years of the applicable fund’s horizon date – for example, an investor born in 1945 would likely select Fidelity’s Managed Retirement 2015 Fund.
See the attached chart for an overview of the current fund line-up.
The Fidelity Managed Retirement Funds are available now, while the digital experience (which includes the online planning tool) will be available in early 2020. Fidelity Managed Cash Flow and the digital experience are available at no extra cost to Fidelity 401(k) and 403(b) clients, while there are expenses associated with the Fidelity Managed Retirement Funds.
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