Workers could soon have a more secure option to save for retirement.
Fidelity Investments recently introduced a new Guaranteed Income Direct platform that companies can offer to employees. The annuity stays within the company, allowing savers to take the money in their 401k and turn it into monthly payments for life, no matter what happens to the market.
"It is basically transferring those assets over to the insurance company with a promise that they will make the lifetime income payments throughout that person's lifetime," said Keri Dogan with Fidelity Investments.
Interest in annuities is exploding because of pandemic-related financial turmoil. Changes ushered in with the 2020 SECURE Act also made it safer for employers to offer annuities.
Before the pandemic, only 10% of employers provided annuities, but Fidelity found nearly 80% of workers were interested in them.
"People really need to cover their essential expenses and retirement with guaranteed income. That way they're not worried," Dogan said. "If the market has volatility, they know they can pay their core bills, they can continue to pay their mortgage or their rent, and they don't have to worry about the market so much."
An annuity is seen as a safer way to save for retirement, but it may not be for everyone.
"Some people don't like the idea of locking up those assets and letting go of them to receive the future income stream, and some people don't need it," Dogan said. "Some people have enough money that they can cover their essential expenses."
If a person dies early, Fidelity's program offers the option to name a beneficiary.
Fidelity's Guaranteed Income Direct platform will launch for some employers early next year and will be available on a larger scale in the second half of 2022.