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August 19, 2024 at 02:08 PM
What You Need to Know
- The Secure Act and Secure 2.0 Act helped create the framework for the new in-plan annuitization options.
- A similar BlackRock program attracted more than $800 million in deposits in the second quarter.
- The J.P. Morgan program will combine a stable-value feature with annuity income.
J.P. Morgan Asset Management has joined the rush to package annuitization options with the target-date funds offered inside 401(k) plans.
The asset manager last week unveiled the SmartRetirement Lifetime Income program,
The JPMorgan program is likely to include annuitization options from Equitable and Prudential, the company said.
What it means: Another asset giant is throwing its sales and marketing muscle behind the idea that the same workers who are using target-date funds to save for retirement can buy annuitization features within the plan, rather than having to shop for outside annuities or other mechanisms to generate retirement income.
For advisors, the movement could mean that more clients will come to them with access to some kind of lifetime income arrangement.
The programs could also increase workers’ interest in outside income planning advice, by introducing them to the concept of income planning.
But the programs could also cause headaches for advisors, by increasing the odds that some retired clients will come to them with nest eggs already locked into in-plan annuitization options that turned out to be a poor fit.
The backdrop: BlackRock CEO Larry Fink has predicted that packages combining target-date funds with annuitization features will soon be the most used investment strategy in the world’s defined contribution retirement plans, because many retirement plan participants need help with using their plan assets to create stable sources of retirement income.
Annuity-based defined contribution plans have always offered in-plan annuitization options.
