Guaranteed Income Should Be Part of Overall Retirement Strategy

In-plan investments that provide guaranteed income should be used as part of an overall allocation strategy, garnering only about 15% to 30% of a deferral, said Joseph Eck, vice president of the institutional solutions group for The Hartford.

Speaking at a “Guaranteed Income – The New Asset Class” conference last week in New York sponsored by The Hartford Financial Services Group Inc., Eck presented information about The Hartford’s latest product offering for defined contribution participants: Hartford Lifetime Income.

This product, which offers retirement plan participants the opportunity to invest in annuities within their 401(k) plan, is increasingly important, commented John Diehl, The Hartford’s senior vice president of the retirement solutions group, because people are not planning for their increasing longevity risk.

“A problem with how clients think about retirement income is that they see themselves as mountain climbers, but don’t understand their objective,” said Diehl; “The ultimate objective is not climbing the mountain, but getting all the way back down.”

How it Works

Participants buy shares of Hartford Lifetime Income. Each share is worth $10 of income for the rest of their lives beginning at 65, and the participant will receive the same amount of income for the rest of their lives—regardless of the ups and downs of financial markets (however, participants can elect to beginning receiving the benefit at 62 or defer until age 70).

Hartford’s product is designed to complement other 401(k) asset classes, Eck said, saying that the company expects employees will use the product as one of various defined contribution plan investments.

The Hartford is in the process of working with over 30 recordkeepers to get its fund available on their platform. However, according to Eck, before the recordkeepers are willing to put in the effort to build out their systems, they want their clients to sign on.

Of course, the issue of how an adviser gets paid for these investment options is another concern. These options are currently being utilized mostly by mega plans, who are less likely to have an adviser. However, The Hartford envisions being able to offer multiple share classes of the Lifetime Income product and says that once it is being sold through advisers, Eck predicted, the firm anticipates offering a revenue share to the adviser.

Although The Hartford only has one sponsor in the process of rolling its Lifetime Income product out to its employees, the firm hopes to sign up between six and eight clients this year.