Proposed New Retirement Product from Fidelity

[Another Reader]

I belong to the Fidelity Greenline Forum and received this today.

We would greatly appreciate your input in this next Greenline Forum study. The goal of this study is to get feedback on a retirement strategy that Fidelity may develop for households like yours.

This study is a little different from the typical GLF studies and would take about 15-20 minutes of your time. It involves the following steps:
First, we’d like you to review a concept and provide your thoughts on this Greenline forum survey.
After this, you’ll have the opportunity to explore the full experience, including creating your own personalized plan.
Once you create your plan, you’ll be able to sign up for early access and provide even more feedback to help us shape the development of this product.

Basically, it is a withdrawal plan where they manage your money. You get an allocation based on your risk tolerance and a recommended withdrawal plan. Several times in the presentation they mention Fidelity managing your money with this plan.

It'a early in the beta testing, but for me it's completely useless. They cannot include either the inherited IRA's or the rental income. There is no indication of exactly what your money would be invested in, except percentages of the various asset classes. Managed funds? Index funds? Not stated. Nor is the fee mentioned.

Thanks, Fido, but no thanks!

 

[COcheesehead]

I wouldn't worry to much about it if its still in the research stage.

I have been involved in some Greenline stuff and haven't seen much come to fruition.

 

[Another Reader]

I'm not worried about it because I don't buy into the idea that Fidelity will manage the money any better than I will. Won't be signing up for this product.

One thing I am worried about is our friends in Washington deciding we must annuitize our retirement accounts for our "safety" (and the profits of the insurance companies that bankroll them). The camel's nose is under the wall of the tent, thanks to the SECURE Act bringing annuities to 401 (k) accounts. I do wonder if the sudden upsurge in this type of product is the brokers perceiving the risk that the insurance companies are going to grab all those fat retirement accounts from them.

 

[Clone]

I think it is probably OK. Not many of us will be interested, but consider how many times we see questions posted where the spouse wants nothing to do with the financial planning and the poster is concerned about how a surviving spouse might be treated. There are plenty of Fast Eddies out there that are more than willing to be 'the nice guy' that handles the money for the surviving spouse.

Would you rather have a glide path in place that tells your spouse to place the money into a (Fidelity or Vanguard or ...) managed draw-down account as opposed to a concern about somebody fast talking them into a variable annuity and front loaded funds?

 

[RobbieB]

Some people like to have other people manage their dough. Yeah, I imagine Fidelity will charge less than annuity would.

 

[BeachOrCity]

I'm not worried about it because I don't buy into the idea that Fidelity will manage the money any better than I will. Won't be signing up for this product.

One thing I am worried about is our friends in Washington deciding we must annuitize our retirement accounts for our "safety" (and the profits of the insurance companies that bankroll them). The camel's nose is under the wall of the tent, thanks to the SECURE Act bringing annuities to 401 (k) accounts. I do wonder if the sudden upsurge in this type of product is the brokers perceiving the risk that the insurance companies are going to grab all those fat retirement accounts from them.

I think SPIA get a bad wrap because people lump them in with other types of annuities.

Getting the ability to buy low cost spia in 401k and IRA is a good thing.

The biggest issue with the rise of defined contribution and decline or defined benefit is the longevity risk has shifted to the individual. This means without pension or spia one needs to “over save” because they might live to 100.

SPIA mitigate this issue.

The reason people don’t buy them right now is because interest rates are low so payouts seem too low.

For me, while I would not buy one now I would buy one when I am 65 or 70 if I am still in good health.

 

[ncbill]

The retirement calculator I use (MaxiFi) says don't bother until age 80, then convert to a SPIA what's left in qualified accounts.

 

[pb4uski]

I would only buy a SPIA if I was concerned that I was underfunded so that i might outtlive my assets and I wouldn't want to be a financial burden to my kids. OTOH, if I don't buy a SPIA and end up not living long then there would be an inheritance for them.

In any case, I would never buy a SPIA without a refund of premium feature and in the quotes that I have seen the monthly benefit between a SPIA and a SPIA with refund of premium are not very different. Perhaps they are at more advanced ages.

 

[bushpilot]

It looks like Schwab is offerring something similar.