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Fidelity Launches Workplace-Based Retirement Plan Solution for Retirees

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Fidelity Investments, the largest recordkeeper for 401(k) plans, is making it easier for employees to stick with their employer’s 401(k) or 403(b) plan after they retire.

It has introduced a new in-plan offering, called Retirement Income Solutions, which provides age-based managed funds for retirees as part of an employer’s fund lineup along with a managed cash flow withdrawal strategy and digital tools to help them manage those strategies.

The new offering “taps into a shift in the marketplace — the growing trend of employees’ preference to leave savings in their former employer’s plan and employers feeling more comfortable having them leave it there,” said Sangeeta Morjani, head of the employer experience and retirement solutions at Fidelity, in a statement.

In fact, Fidelity reports that as of December 2018, 55% of retirees on Fidelity’s platform were keeping their money in Fidelity plan past the first year of the retirement. The figure was 45% in 2015, says Dave Gray, head of workplace retirement offerings and platforms.

The new program provides retirees access to seven management retirement funds tied to different birth years, starting with births before 1933 up to 1962, and contain a mix of active and passive funds.

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“We’re acknowledging that as people enter retirement and use their 401(k) plan as a source of income, more customized solutions are needed,” says Eric Kaplan, head of target date and 529 products at Fidelity.

Fees for the managed funds vary depending on the share class the plan sponsor chooses. The K6 class, which is the most popular among 401(k) plans, according to Gray, charges net expense ratios between 35 and 38 basis points.

The funds are currently available for plan sponsors, who choose to sign for the program, and the digital tools for retirees will be available in early 2020, according to Fidelity.

Fidelity serves as the recordkeeper for close to 34,000 defined contribution plans with 24 million participants. About 4.2 million of those participants are baby boomers who could benefit from the program. Plan sponsors could benefit as well because having more assets in workplace retirement plan helps manage plan costs, which also means lower expenses for workers.

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