Income+, Helping Employees Prepare for Retiment

Many employers have started providing ways to help prepare employees who are nearing retirement age prepare for the financial reality of retirement. One company, Financial Engines, introduced a new service called Income+ that is aimed at protecting the portfolio of employees before the employees stop working. The service also aims to generate consistent monthly payments that employees can deposit into their checking accounts after retirement.

The service is customizable, but the general model has the employee live on his portfolio income through age 85. The employee can also use another portion of his savings to purchase an immediate annuity before age 86 that will allow the employee to collect the same amount of income for the remainder of his life. This service gradually makes the employee’s portfolio more conservative as the employee nears retirement, with about 58% of a typical portfolio invested in stock funds by the time the employee is around age 60. By the time the employee retires, about 20% of the portfolio is invested in stock funds, 65% in fixed income, and 15% in bond funds.   

The service can cost an employee 0.25% to 0.60% of his assets, though the amount may increase based on the employee’s account balance. However, employees should compare this service with the option of rolling assets into an I.R.A as the latter may be a better option for some employees after retirement. Many employers with 401(k) plans have already signed up with Financial Engines for Income+, and some of the employers will automatically enroll their 401(k) participants into the plan when the employees reach age 60.

For more information on Income+, see Tara Siegel Bernard, More Advice for Pre-Retirees Coming to 401(k)’s, The New York Times, Dec. 2, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.