Counter market volatility with Income America 5ForLife

Stock market volatility is a normal part of investing, but that doesn’t make it any easier for participants who are anxiously watching their retirement plan portfolios rise and fall.

In fact, assuming a 50-year investment horizon, participants can expect to experience roughly 14 bear markets1—when the closing price of the stock market drops at least 20% from its most recent high.

Beyond market volatility, there’s always the threat of a recession. Since 1948, the United States has lived through 19 recessions2, triggered by everything from railroad failures to inflation to the dot-com bust.

While higher market volatility means higher investment risk, it also means potentially greater earnings potential. That’s why some investors are content to ride out the ups and downs of the market while they’re still working. However, market volatility in retirement is another story.

Hanging on through market volatility

In volatile markets, prices can rise and fall rapidly, which can sometimes cause participants to make rash decisions, such as panic-selling their investments. And even a single misguided investment decision can have major ramifications on participants’ financial security and income in retirement.

Participants who are nearing or already in retirement are especially vulnerable to stock market volatility. That’s because when participants sell investments to fund their lifestyle by taking income from their portfolio, these unrealized “paper losses” become real. In particular, significant market declines early in a participant’s retirement can have dramatic “sequence of returns risk” ramifications on the longevity of a retirement investment portfolio.

Choosing steady retirement income over stock market volatility

Instead of being at the whim of the stock market in retirement, participants now have a more predictable option: Income America 5ForLife. By offering 5ForLife in a retirement plan’s lineup, you can help plan participants limit their exposure to market volatility and enjoy guaranteed retirement income for life.

Here’s how it works. Participants contribute to the in-plan Income America 5ForLife investment option, just like any other investment in the retirement plan lineup. These contributions establish an income base, which will be used to calculate guaranteed income in retirement. Every year on the participants’ birthday, the income base can be re-set, stepping up to lock in any gains.

When they turn 65, their income base is locked in and can never go down, even if the market drops. Participants can then begin receiving lifetime income payments of 5% of their income base every year for the rest of their lives—guaranteed.3

Consider this retirement income example: Sophia moves $175,000 from other funds in her retirement account into Income America 5ForLife. This establishes her income base. Every year on her birthday, she benefits from the annual step-up feature. At age 65, her contributions total $282,000, but thanks to market gains and annual step-up opportunities, her income base locks in at $440,000. This translates into lifetime income payments of $22,000/year, or 5% of her income base, for life, even if she outlives her balance or there’s a severe market downturn.

Example Growth Chart
This chart is for illustration purposes only and shows the general principles of Income America 5ForLife, assumes a series of hypothetical annualized portfolio returns that illustrate both potential growth and the potential volatility of the market, no additional contributions after retirement and no post-retirement withdrawals that exceed the 5% guaranteed lifetime income payments. In this example, after age 65, no additional contributions or withdrawals were made, so no additional annual step-ups were applied since there was a declining investment balance.

Help your participants save for a future they can depend on

Participants are ready for a more secure future. In fact, research shows that 75% of participants would be more likely to leave money in their retirement plan if their employer offered an investment option specifically to help retirees draw income during retirement.

Consider adding Income America 5ForLife to the plan’s investment lineup to provide participants with guaranteed retirement income and protection from stock market volatility.

1 A Brief History of U.S. Bear Markets, Investopedia.com, September 23, 2022

2 History of Recessions in the United States, thebalancemoney.com, October 19, 2022

3 Your income base is never available for withdrawal and is only used for calculating your income. It may be adjusted based on contributions to and/or withdrawals from the investment. While you can withdraw the market value of your investment option at any time without any fees or penalties, doing so may cause you to lose some or all of the income guarantee. As long as plan provisions permit, you may elect to receive income at any time after age 65. If you withdraw more than the guaranteed income in any year, your income base and future guaranteed income will decrease. However, if your required minimum distribution exceeds your guaranteed income amount, your income base will not be affected and your payments will not be lowered.