BlackRock clumsily reverse-engineers retirement
BLK•BlackRock unveiled customizable target-date 401(k) funds that can include private investments and lifetime-income options. Its LifePath Paycheck option lets workers use some retirement savings to buy an annuity.
1. Customizable retirement funds
BlackRock unveiled a framework that lets employers tailor target-date funds, choosing index-based or actively managed strategies, or a whole-portfolio approach that can incorporate private investments and lifetime-income options. Its LifePath Paycheck product lets workers use part of their savings to buy an annuity at retirement.
2. Income and investment trade-offs
Workers can use a portion of their balance to buy lifetime income while leaving the rest invested elsewhere. BlackRock aims to strip out many traditional insurance charges so the option costs about the same as an index fund. The article argues that adding private assets is less compelling, noting that the Cambridge Associates Private Equity Index returned around 9% annually after fees in the five years through March, compared with 12% for the S&P 500.
3. Simplicity concerns
The article says pension-like regularity at low cost would improve on conventional 401(k) plans, but a broader menu of risks could make retirement choices less simple.
