Plan sponsors and advisors concerned with generating retirement income for their clients will soon have another product to consider: The newly minted Prudential IncomeFlex from Prudential Retirement, a division of Prudential Financial.
With IncomeFlex, plan participants can select from five distinct lifecycle funds, ranging from conservative to aggressive, into which they can transfer all or part of the assets in their 401(k) account or other defined contribution plan. Each fund is designed to take advantage of market cycles, says Prudential Retirement’s Mark Foley, VP of product development for retirement income, and by investing in them, participants build an income base that guarantees a lifetime paycheck.
“This is a fully liquid product,” Foley says. “Participants can decide how much they want to put in, and they can decide when they want to want to get in or get out.”
To boot, “we offer participants a guaranteed lifetime withdrawal benefit, regardless of the investment they make,” he says.
Unlike an annuity, the “lifetime paycheck” takes the form of a withdrawal benefit determined by the plan participant. As long as the participant withdraws that amount of less each year, Prudential guarantees that once the account balance runs out, it will continue to pay that amount to the participant for the remainder of his life (or spouse, if that option is chosen for an additional fee).
If strong performance results in participants’ account balances exceeding the income base, their future lifetime paychecks can increase. Participants are also guaranteed that their income base will grow at an annualized minimum of 5% from age 50 until the lifetime paycheck amount is locked in at age 70.
The Prudential IncomeFlex guarantee costs 0.95% annually, in addition to the underlying funds’ investment management fees.
Foley says Prudential plans to bring in pilot clients to test the product soon.