Daily Money - Annuities May Be Coming to Your 401(k)

December 7, 2021

Investing for retirement should be pretty straightforward. You just select a target-date fund — one that’s pegged to your estimated retirement year— within your company 401(k) or your IRA and put your contributions on auto-pilot. But once you retire, it’s not so simple deciding how to live off all that you’ve accumulated. Fidelity recently introduced a product to take some of the guesswork out of what financial advisors call “the decumulation phase.” It offers eligible 401(k) plan participants the option of buying an immediate income annuity with some of the money in their retirement account. This will give you a guaranteed income stream within your 401(k). Learn more about this new option in today’s edition.

Best wishes,
 
 
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Timely Retirement News, Insights and Advice

Fidelity has launched a new guaranteed income product within 401(k)s.

“It feels really good to be able to give that to them,” one says.

Will these new companies be around decades down the line?

Retire With Money Community News

What are you up to these days?

I’m currently a data analyst at a non-profit that provides housing and holistic health services to formerly homeless New Yorkers. I am looking to launch an LLC to help guide folks my age around financial literacy and financial planning. In my spare time, I’m almost always reading (currently “A Beginner’s Guide to the End”). I enjoy taking free classes to learn new skills, and I love taking pictures of nature and NYC’s architecture.
 
Nice! Any advice you'd like to share for others about preparing for retirement?
 
Biggest tip: Start investing in your retirement as soon as you can. It’s never too late — or too early — to start! I currently set aside 30-35% of my income towards retirement, savings, and investing. The bulk of that goes into my retirement accounts (401(k) and self-directed Roth IRA), while the next biggest chunk goes towards savings and I set aside money for my child’s 529 college savings plan. When looking into a 529, I found that you could open one for your unborn child and then transfer the account to its name once it has a Social Security number — so we went this route to start saving as soon as possible. Lastly, I throw the rest towards my brokerage account in well-diversified, low-to-no-cost index funds that track the S&P 500 and international stock market.
 
I sometimes wish I knew about or applied these principles when I was 18, but I’m grateful that I didn’t get discouraged by a timeline and invested anyway as soon as I had the know-how.
 
Absolutely! What are your investing and spending philosophies?
 
I believe in investing long term, investing often, and investing regardless of swings in the market. Omicron variant causing dips in the market? I’ll keep investing.
 
I always “pay myself” first — that is, I have my savings, 529 money, and self-directed Roth IRA funds set up as direct deposit disbursements as soon as I get paid. Of course the 401(k) contributions are automatic as well.
 
All of my bills are on auto-pay, though it’s always wise to review the invoices for accuracy.
 
As far as what’s left over, I’m not really into expensive technology, name-brand clothing, or cars, really. When I do decide to buy a car, it’d be a gently used one that’s four or more years old and paid for completely in cash.

Retirement News From Around The Web

Money Advice for Retirees on Fixed Incomes When Inflation Is Soaring
The tips include TIPS (Treasury inflation-protected securities). NEXT AVENUE

How Estate Planning Can Help You Pass Down a House to Your Kids and Give Them a Financial Leg up
Think through the tax and legal implications of each strategy. USA TODAY

Amazon Vet Launches Direct-to-Consumer Casket Company
The typical markup on a casket is between 200% and 500%, the founder says. THE SEATTLE TIMES

What Most People Get Wrong About 'the 4% Rule'
The research on a 4% withdrawal rate in retirement is mischaracterized as a rule, says Jamie Hopkins, a certified financial planner with Carson Group. YOUTUBE

Elizabeth O'Brien is deputy editor at Money. She has covered retirement and health care for nearly a decade. A Brooklyn resident and mom of two boys, she navigates the alphabet soup of Medicare and the New York City subway system with equal ease. You can email her at elizabeth.obrien@money.com and follow her on Twitter at @elizobrien.

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