Equitable, BlackRock product offers retirement security, predictable ‘paycheck’
Life insurance and financial services company Equitable has announced LifePath Paycheck, a product created in a joint partnership with investment firm BlackRock. With the goal of providing additional security for retiring Americans, LifePath Paycheck offers “guaranteed income” via a targeted date fund.
When a participant enters retirement, they will receive a guaranteed amount of funds in a paycheck-like manner that is meant to provide a stable source of income. Automatically adjusted for a targeted retirement year, LifePath Paycheck is an alternative retirement plan meant to be more stable than a standard 401(k).
The partnership was forged out of careful vetting by BlackRock, which had been working on the concept behind the new program for several years. Keith Namiot, head of Institutional Markets at Equitable, stated that “Equitable is one of the leaders in innovation and development in the industry” and further emphasized the principles behind Equitable’s approach to risk and obligation management as key factors in creating the partnership.
First available for access when the individual reaches 59½, this option creates a predictable income for people who are currently planning their retirement. When combined with other options such as Social Security, LifePath Paycheck is intended to assuage many worries for retirees and financial planners.
Solving the ‘significant retirement gap’
Namiot describes LifePath Paycheck as a tool for experts attempting to solve the “significant retirement gap” in the financial market. With the growing concern of many Americans regarding their long-term financial stability in their retirement, there has been an increased demand for more stable and less risky options.
Equitable intends for this process to be fully accessible to participants and has created a website that includes the ability to check one’s balance, current allotment, and accumulated lifetime income.
According to Namiot, LifePath Paycheck will offer less risk for its investments and will instead target options that are more stable and less prone to dramatic shifts in value as markets inevitably shift up and down. Rather than being 100% invested in bonds as the participant ages, they will gradually invest a portion of their assets into the guarantee.
Comparable to other target-date funds, LifePath Paycheck targets reasonable returns with steady growth at the forefront to maintain the promised guarantee. Participants can start paying into the program when they so choose, but major steps gain momentum when they reach age 55.
Starting at age 55, approximately 10% of a participant’s balance will be put into lifetime income units. This percentage will increase as they approach retirement, rising to nearly 30% by the time they reach age 65. A participant is not required to exercise their guaranteed income at this point, but they must do so by the time they are 72, or else the guarantee is no longer valid.
Product not intended as replacement
Namiot stresses that LifePath Paycheck was not intended to replace or lessen the value of other retirement options but is simply another tool in the arsenal of financial advisors for fulfilling their financial duties for their clients. It is intended to be used in conjunction with traditional methods of retirement saving, such as a 401(k) or pension.
Equitable intends for LifePath Paycheck to also benefit employers who are looking to provide tangible benefits for their employees in the face of rising worries about inflation and the loss of value for 401(k) plans following major recessions such as the market fluctuation during the COVID-19 pandemic.
Another concern that LifePath Paychek aims to address is the impact of inflation on existing assets. According to Northwestern Mutual’s 2024 Planning & Progress study, Americans need approximately $1.46 million to retire comfortably. While inflation levels have mostly stabilized, Namiot reiterated that the fund’s conservative nature would protect participants from the worst effects of another inflation crisis.
To address this concern, particular emphasis is placed on protections against inflation. The guarantee is meant to curtail the loss of value that high inflation rates have levied against existing retirement plans. With inflation being one of the key concerns for many Americans, Equitable’s goal was to create an inflation-resistant retirement option.
One aim of LifePath Paycheck is to eliminate the anxiety over outliving one’s assets, a concern of many retiring Americans. “We believe that this is a critical way for workers to obtain a longer and more fulfilling retirement,” says Namiot.
Devin Wilhelm has a master’s degree in professional writing and is based out of Hershey, Pa. His main beats are fintech, corporate finance and market research. Contact him at [email protected].
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