Fidelity Investments Launches Fidelity Lifetime Income Solution
BOSTON, MA, October 3, 2006 -– In response to employer concerns about the longterm retirement security of their employees, Fidelity Investments today announced the availability of Fidelity Lifetime Income SolutionsSM (FLIS), an out-of-plan annuities selection program designed to help plan sponsors provide employees a way to convert a portion of their retirement savings into a guaranteed lifetime income stream.
"401k plan participants need to be focused on effectively managing savings throughout their retirement, which is why annuitizing a portion of their 401k savings to provide guaranteed retirement income may make sense for a growing number of American workers," said Jeffrey R. (Jeff) Carney, president, Fidelity Institutional Retirement Services Company (FIRSCo).
How FLIS Works
To make it easier for employers to offer their 401k participants a guaranteed, defined benefit-like payout option upon retirement, Fidelity developed the FLIS program. Based on Fidelity’s nearly 20 years of industry-leading experience as an insurance provider, FLIS is an out-of-plan annuity selection program designed to simplify the annuity buying process for participants, while making it easy for plan sponsors to provide their participants an annuity payout option with no administrative burden and at no cost to plan sponsors.
Among its many benefits, FLIS assists plan sponsors and employees with the important task of selecting and monitoring an annuity provider by pre-screening insurance carriers for creditworthiness, strength of management, long-term capacity and competitive design.
In addition to pre-screening, FLIS ensures that participating carriers compete on every fixed-income annuity quote, which can help employees get better payouts. Because income needs vary greatly based on an individual’s specific circumstances, FLIS also makes a range of annuity lifetime income solutions available, including fixed, variable income and combination annuities.
To help employees determine whether an annuity lifetime income solution is right for them, how much of their savings they may wish to convert, which type of annuity best suits their needs and how to take next steps, FLIS provides employees with comprehensive educational materials, planning tools and access to experienced, noncommissioned annuity specialists.
Annuities can help American workers mitigate key retirement savings risks "The reality is that Americans are living longer than ever before, which means that their retirement savings increasingly must extend for longer periods of time," said Carney. "In fact, there is a 50 percent chance that at least one member of a healthy, 65-year-old couple today will live to 92.3 Given such increased longevity, it may make sense for more Americans to consider annuities as insurance against the risk of outliving their assets."
Purchasing an annuity allows investors to effectively pass key retirement income risks along to an insurance company. The retiree pays an insurance company a lumpsum premium, and in return, the insurance company agrees to pay the annuitant guaranteed income.
According to Fidelity Strategic Advisers®, Inc., converting no more than 30 percent of retirement assets into an annuity can successfully help retirees protect against key retirement savings risks such as increased longevity, fluctuating investment returns and inflation, without risking liquidity needs and long-term growth.
Newer Annuity Offerings Feature Increased Transparency, Lower Costs
While all annuities made available through the FLIS program are designed to be transparent and low cost, Carney noted that it is important for employees to understand that there are different types of annuities, each of which help meet different investment needs and preferences.
Fixed annuities, for example, guarantee a fixed payment for a specific period of time or a lifetime, allowing employees to know exactly what their payment will be every month and how long it will last.
Variable income annuities, by comparison, provide lifetime income that varies based on the performance of the underlying annuity funds selected by an employee. Variable annuities may generate higher income payments over time if the funds perform well, making them a good choice for employees looking for increasing income and/or a potential hedge against inflation.
The FLIS program also offers a combination annuity offering, which provides both fixed and variable income payments. Combination annuities provide employees with a fixed income base payment that stays the same, as well as a variable portion with the potential to increase income if investment performance is favorable.
About Fidelity Investment Life Insurance Services Company
Established in 1987, Fidelity Investments Life Insurance Company (FILI) and for NY residents, Empire Fidelity Investments Life Insurance Company®, NY, NY, develop and markets their own insurance products, in addition to distributing those of other high-quality insurers. These products are made available to investors through FILI’s internal distribution arm, Fidelity Insurance Agency, Inc. (FIA). FILI maintains an AA (very strong, 2nd highest) rating from S&P and an A+ (superior, 2nd highest) rating from A.M. Best.
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