lifetime income builder
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Frequently Asked Questions
A target date fund (TDF) with Lifetime Income Builder maintains equal or better long-term accumulation compared to traditional TDFs because Lifetime Income Builder acts as a fixed income alternative. Think of Lifetime Income Builder as a separate asset class, with a daily valuation and growth similar to fixed income investments. In the TDF, Lifetime Income Builder replaces the fixed income portion of the portfolio, which enables the investment to provide lifetime income while also maintaining the growth potential of a traditional TDF.
We turned Lifetime Income Builder into an asset class and fully embedded it into a target date fund. This makes the underlying experience for the participant the same as it would be with any traditional target date fund: a professionally managed solution that provides the same level of growth opportunity, control of assets, and requires no participant decisions. But unlike a traditional TDF, it also drives guaranteed income that a participant can never outlive and eliminates sequence of return risk along the way.
With our product design, we’ve eliminated complex decisions for the participant. We’ve done this by embedding Lifetime Income Builder into a target date fund where all those decisions are made at the investment management level on behalf of the participant. This creates a simple, easy, and automatic experience for participants.
One of the biggest challenges for participants comes in the years leading up to retirement as they face potential sequence of returns risk. The quarterly high-water mark1 feature built into our product eliminates that challenge. Once a HWM is locked in, a participant’s future income benefit can never decline due to market volatility.
A target date fund with Lifetime Income Builder isn’t a point-in-time purchase where the participant buys the annuity and the benefit is driven by today’s interest rate environment. Instead, if interest rates go up, the participant will get the benefit of those rising interest rates, because it’s gliding into the solution on a monthly basis. Once it is set, a participant will never get less than the guaranteed rate, but they can get more.
A target date fund with Lifetime Income Builder does not wrap a portfolio with a guarantee. We did that on purpose because wrapping a portfolio creates an extra fee (typically 1%) on the entire fund. Instead, we embedded Lifetime Income Builder inside the target date fund to make it like any other asset class.
A target date fund with Lifetime Income Builder is no different than other investments. Every investment product has implicit costs, a fact that many industry professionals overlook. Fixed income, for example, has a spread but the declared cost is of the mutual fund that owns that fixed income product. Our solution works the same way. The end cost to the participant of the overall TDF is clearly declared, and that investment has numerous underlying holdings – one being Lifetime Income Builder.
This solution has strong asset managers and insurance providers, and is designed to deliver better participant outcomes. Looking at the track record of the companies that bring the solution can give you a lot of comfort to be open to new innovation that can help solve the concerns of an overwhelming percentage of participants.
One of the benefits of our solution is that it is simple, and it does not require participants to make difficult decisions. The solution is embedded in a target date fund and professionally managed within a glidepath which means both the accumulation and the decumulation experience is automatic for the participant.
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1The value of the Target Date Fund account is measured on the last business day of each calendar quarter and on either the last date that contributions can be made to the Fund, or the month prior to income activation.
2Income begins at approximately age 65. Exact age will be based on year of birth and product version.
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This website is intended for institutional retirement industry professionals.
• Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May lose value
This material is not a recommendation to buy, sell, hold, or roll over any asset, adopt a financial strategy, or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person.
Lifetime Income Builder will be powered by an insured guaranteed income solution issued by an insurance carrier that the plan fiduciary has determined qualifies for the safe harbor provisions of ERISA section 404. All guarantees and protections are subject to the claims-paying ability of the issuing insurance carrier. Lifetime Income Builder does not directly participate in the stock market or any index. It is not possible to invest in an index. Withdrawals are subject to income tax, and withdrawals before age 59½ may be subject to a 10% federal tax penalty.
Investing involves risk including the risk of loss of principal. Such activities may not be suitable for everyone.
Each target date fund (“TDF”) in a series is established by a trustee (the “Trustee”) and held in a collective investment trust (the “Trust”). The Trust is a bank-sponsored collective investment trust and not a mutual fund. Different series for the TDFs have been established by the Trustee and operate differently. The Trustee manages the Trust and has ultimate investment authority for each TDF in the applicable series. The Trust is exempt from registration under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended. Because the Trust is not registered with or required to file prospectuses or registration statements with the SEC or any other regulatory body, neither one is available. Investors should consult the Offering Memorandum for the applicable series and carefully consider the investment objectives, risk, charges, and expenses of the TDFs in that series before investing. Investors should further consult the Offering Memorandum for the applicable series to understand how the TDFs provide lifetime income, including whether a certain amount of lifetime income is guaranteed or not, how the income payment percentages at income activation are set, whether a joint income option is offered, and if so, how election of that option impacts income payments, how the high-water mark is set, and other important details regarding the operation of the TDFs in the applicable series.
“Lifetime Income Builder” is a group fixed indexed annuity with a guaranteed lifetime withdrawal benefit (a “FIA”). Each TDF may invest in more than one FIA. Advantage Retirement Solutions, LLC (“ARS”) is the inventor of Lifetime Income Builder. Lifetime Income Builder is not provided by or guaranteed by the Trustee, ARS or any of their affiliates.
The TDFs invest in FIAs that are intended to back the Trust’s investment objectives, lifetime income. Each FIA is issued by an insurance company to the Trustee. The FIAs provide guaranteed payments to the Trust and are subject to the claims-paying ability of the issuing insurance companies. The FIA guarantees are not made to the participants, and participants are not beneficiaries of any annuity contract. If the value of the other investments in the TDFs reaches zero at or after income activation, income payments are adjusted as detailed in the applicable Offering Memorandum.
The TDFs are designed for investors expected to retire around the year indicated in each TDF’s name. When choosing whether to invest in the TDF for which an investor age qualifies, investors should consider whether they anticipate retiring significantly earlier or later than age 65 even if such investors retire on or near a TDF’s target date. There may be other considerations relevant to determining whether investment in the TDF best meets their individual circumstances and investment goals. The TDF’s asset allocation strategy becomes increasingly conservative as it approaches the target date and beyond. The investment risks of each TDF change over time as its asset allocation changes.
An investment in a TDF is not a bank deposit and is not insured or guaranteed by the insurance companies, the trustee, the asset manager, the Federal Deposit Insurance Corporation (“FDIC”), or any other government agency. The Trust is not insured by the FDIC and is not registered with the Securities and Exchange Commission.
The information provided herein does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security or a product, or a recommendation of the suitability of any investment strategy for a particular investor. It does not take into account any investor’s particular objectives, strategies, tax status or investment horizon.
All information is from ARS (except where noted otherwise) or has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The whole or any part of this work may not be reproduced, copied or transmitted without ARS’s express written consent.