Insurance and financial services company Nationwide Financial has created a retirement plan product that guarantees lifetime income with more flexibility than a traditional annuity, the company announced.
The product, called the Lifetime Income Builder, is designed to be used within retirement plans and offers a guaranteed income solution built to help plan participants maximize their retirement income while also providing liquidity and portability.
The Lifetime Income Builder is the second in what will be a series of new products that Nationwide is rolling out, said Hutch Schafer, vice president of product development at Nationwide Financial, in an interview Thursday.
The solution embeds a fixed-indexed annuity with a guaranteed lifetime withdrawal benefit into a collective investment trust consisting of a series of target date funds. This increases income potential while the target date fund offers a familiar investment experience for the participant, Nationwide said.
“The way we designed this is to make it as simple as possible for the participant and the plan sponsor’s financial advisor to use,” Schafer said. When the participant reaches retirement age, a target date fund “begins to generate income for the participant’s lifetime, which takes the guesswork out of retirement planning. The income can be taken as a withdrawal or it can be reinvested.”
The new retirement plan option, slated to launch later this year, was created in partnership with Annexus Retirement Solutions, a firm based in Scottsdale, Ariz., that builds retirement plan options.
Products like this one were made possible by newly enacted retirement law. The Setting Every Community Up for Retirement Enhancement Act of 2020 (otherwise known as the SECURE Act) allowed retirement plans to offer additional investment opportunities, such as annuities, within defined contribution retirement plans. The new option combines guaranteed lifetime income along with a systematic withdrawal strategy that efficiently addresses some of the risks participants face in generating retirement income, Nationwide said.
“It’s an exciting time—a true paradigm shift—for the workplace retirement plan industry and plan participants,” said Eric Stevenson, president of Nationwide retirement plans, in a statement. “Lifetime Income Builder is the latest in our suite of in-plan guarantees designed to address savers’ growing income needs across all plan types and sizes.”
"Until now, the retirement planning industry hasn’t made it easy for participants to know how to secure their financial future,” said Don Dady, co-founder of Annexus, the parent company of Annexus Retirement Solutions, in a statement. “The risks in retirement require an integrated solution for most participants to optimize the potential income from their retirement plan. Lifetime Income Builder is designed to achieve this objective without requiring participants to give up control or flexibility.”
In December, Nationwide announced the first product in this series with the Nationwide Indexed Principal Protection plan, which protects participants from losing any of their initial investment in market downturns.