Voya Financial is one of the newest companies to introduce a 401k annuity product. In “Voya jumps into 401(k) annuity game,” Marlene Y. Satter of Benefits Pro introduced the company’s Lifetime Income Strategy. Voya’s Retirement Solutions business says that their new product is a retirement income option for workers at large companies who have money in a 401k plan. They call it an age-based asset allocation program. The purpose of Voya’s Lifetime Income Strategy plan is for workers to convert their retirement savings into a lifetime income stream. While the company is not calling this new plan an annuity, they said that it is like a type of annuity which includes a guaranteed lifetime withdrawal benefit (GLWB). That sounds like it’s an annuity to me.
Whether or not Voya is calling the Lifetime Income Strategy an annuity is just a matter of wording. Most Americans don’t know what an annuity is or it’s purpose, so Voya is focusing their marketing on the solution provided by their product rather than labeling it. TIAA-CREF recently found that only 26% of young Americans aged 18-35 know about annuities. That number only increases to 35% when you take into account the total population. They may not know about annuity products, but they are focused on retirement income and are concerned that they will outlive theirs. The top priority of those surveyed was finding a lifetime retirement income stream, a number that increased from 34% to 48% over the course of a year. The number two concern was the safety of their retirement savings.
The search for guaranteed money has brought annuities back into the spotlight. Last year, the government made it easier to use annuities in qualified retirement plans as the default investment. American General was one of the first to introduce a deferred income annuity for IRA plans last fall with their American Pathway DIA. A recent study done by the Institutional Retirement Income Council gave a slew of reasons that plan sponsors should offer annuity products within their retirement plans. Overall plan costs would be reduced, they can retain employees, help aging employees successfully retire rather that feel trapped in their positions, and avoid additional regulations. Voya offers another large benefit to employers who offer their Lifetime Income Strategy plan. Plan sponsors don’t have to take on fiduciary responsibility because the company that designed the offering, AllianceBernstein, takes that on. As more companies design lifetime income options for 401k plans, consumers will continue to benefit from this important retirement income tool.
Written by Rachel Summit