News
401(K) · Annuities · Financial Services · Retirement Planning
Fidelity Investments has nationally launched Guaranteed Income Direct, an option allowing 401(k), 403(b), and 457(b) participants to convert savings into immediate income annuities from third-party insurers, addressing the decumulation problem.
This offering, initially presented in 2021, provides a pension-like paycheck in retirement, with Fidelity partnering with Micruity Inc. and featuring annuities from Pacific Life, Prudential Financial, and Western & Southern Financial Group.
The service incurs no direct charge for plan sponsors, though document amendment fees may apply. This move by Fidelity enters a growing market, as evidenced by General Motors and Stellantis offering Hueler Income Solutions to UAW members, and Nuveen and State Street Global Advisors launching target-date funds with embedded annuity options.
Retail annuity sales reached a second consecutive annual record in 2023, with fixed annuities totaling $385 billion, a 23% increase from 2022, and income annuities also experiencing significant growth, according to LIMRA. Fidelity's research indicates 65% of participants desire guaranteed income options and 81% of plan sponsors wish to provide them.
However, the Department of Labor's proposed retirement security rule, which aims for stricter fiduciary requirements for annuity sales, introduces regulatory uncertainty. Separately, preliminary research from the Employee Benefit Research Institute (EBRI) on the SECURE 2.0 Act of 2022 indicates modest benefits for those nearing retirement but a larger impact on younger workers, primarily through automatic enrollment and the saver's match provisions.
