State Street Rolls Out New Way to Add Lifetime Retirement Income to Your Target Date Fund. Is It Right For You?

There’s a new way to add a lifetime income stream to your retirement plan.

State Street, the world’s fourth-largest asset manager, is joining Annexus Retirement Solutions and Global Trust Company to launch a new series of target-date funds that have a lifetime income product embedded directly in their glide paths. The funds, known as the State Street GTC Retirement Income Builder Series, will allow retirement savers to convert a portion of their savings into a pension-like income stream for life.

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“The industry has been stuck in a stale way of thinking, and many of today’s income products require participants to trade off growth opportunity or access to funds in return for lifetime income,” said Dave Paulsen, chief distribution officer at Annexus Retirement Solutions. “We designed our solution to ensure that participants no longer need to make sacrifices in exchange for lifetime income.”

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How It Works

While TDFs gradually reduce equity exposure and increase fixed-income investments as the target date approaches, the State Street funds will shift a portion of assets into the annuity as a saver gets closer to his target date.

Here’s how it works: the fund has a group fixed indexed annuity with a guaranteed lifetime withdrawal benefit – known as the Annexus Retirement Solutions’ Lifetime Income Builder – embedded directly within its target date fund’s glide path as a separate asset class. According to The Wall Street Journal, the funds will begin replacing bond holdings with an annuity when the saver hits age 47. At age 65, monthly payments from the annuity will begin, the paper reported.

Once the income component is activated, the funds will target a 6% annual income rate, although the actual percentage may vary.

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The paper also reported that the funds will initially cost 0.10% per year and 0.20% after savings are converted into an annuity. However, it’s unclear when the new target date fund series will be available.

State Street Global Advisors will manage a portion of the funds’ underlying assets and make glide path recommendations to the trustee, GTC. Meanwhile, Nationwide and Athene are among the insurers that back Annexus’ Lifetime Income Builder.

Bottom Line

State Street is teaming up with Annexus Retirement Solutions and Global Trust Company to launch a new target date retirement fund with a lifetime income solution. The new product will allow retirement savers to shift a portion of their assets into Annexus Retirement Solutions’ Lifetime Income Builder, a group fixed indexed annuity that aims for a 6% income rate.

Retirement Planning Tips

• A financial advisor can help you decide how to invest your retirement assets and what financial products are best suited for your needs. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Retirement planning is about more than just counting your money. Where you’ll live is a critical component of any retirement plan. SmartAsset’s retirement tax-friendliness tool can help you determine which states are right for you based on their tax friendliness.

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