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Wednesday, February 9, 2011

Fidelity Investments® Takes Retirement Income Planning to a New Level on Behalf of Baby Boomers

Firm Introduces Innovative New Program to Motivate Retiring Investors to Create an Income Strategy That Helps Ensure Their Retirement Savings Will Last

Press Release Source: Fidelity On Wednesday February 2, 2011, 8:34 am EST

BOSTONFeb. 2, 2011 /PRNewswire/ -- Fidelity Investments®, the No. 1 provider of workplace retirement savings plans and Individual Retirement Accounts (IRAs)(1), today announced the launch of an innovative new program ( to help investors and workplace plan participants nearing or living in retirement shift their investment portfolios from a savings focus to an income generating approach to help support their retirement vision.  The new program is unmatched in the industry and builds upon Fidelity's already extensive retirement income guidance and product offerings.

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"Nearly 3 million Baby Boomers will turn 65 this year – about 7,500 per day – and begin their transition into a retirement which must account for longer life spans, stock market volatility, a low interest rate environment, rising heath care costs, a changing tax landscape and high unemployment rates," said Kathleen A. Murphy, president of Personal Investing at Fidelity®.  "As the retirement leader in the financial services industry, we are committed to helping this generation work through these challenges.  Based on our market leadership and insights from helping millions of Americans plan for retirement, we've now developed a comprehensive income strategy program that will allow investors to create and test different financial strategies based upon their needs and circumstances."

Program Launches with Month-Long Nationwide Initiative

The new program kicks off with an intensive 30-day, coast-to-coast, education and investor engagement initiative in which Fidelity will invite investors and workplace plan participants across the country to attend one of 200 free, live educational events and seminars hosted by Fidelity at local Fidelity branches, regional sites, employee worksites and on the Web.

As part of this concentrated effort, investors will learn about Fidelity's new, technologically advanced retirement income planning and scenario building tool, gain access to in-depth online educational materials, and be able to sign-up for 1:1 guidance sessions with a Fidelity investment professional.  These professionals are specifically trained to help investors navigate the complex financial and emotional issues often associated with income planning.  All of this is being offered at no cost to Fidelity and non-Fidelity customers alike.

An important part of the program is the Fidelity Income Strategy Evaluator(SM) ("Evaluator") ( It is designed to help investors nearing or early in retirement assess their income needs and structure a portfolio and withdrawal strategy to help ensure their specific sources of retirement income and expenses are aligned throughout retirement.

The Evaluator is the first tool of its kind to be offered online directly to investors and incorporates a broad range of Fidelity and non-Fidelity income and investment products as the building blocks for its suggested income strategies.  When combined with the education and guidance provided by Fidelity's investment professionals, the Evaluator helps answer key questions on the minds of today's pre-retirees, such as:

  • How do I turn my savings into a "paycheck" I can receive in retirement?

  • Are there ways to help maximize my retirement income — and help ensure my money will last?

  • What's the potential impact of taxes, inflation and rising health care costs on my retirement savings?

Preferences Coupled With Real-Time Modeling Scenarios Provide Real Answers

The Evaluator first focuses on understanding each investor's financial situation and preferences.  This assessment includes investors' retirement visions (e.g., whether they plan to work, how they want to spend their leisure time), personal profile (e.g., health status, expected life span), and expected retirement income sources (e.g., Social Security, pension, workplace savings, real estate income).  The Evaluator then helps investors identify any cash flow gaps in the short-term, or throughout their planned retirement, by comparing their expected sources of income with planned retirement expenses – both essential and discretionary.

Finally, the investor is asked to think about his or her expectations and priorities for income in and throughout retirement.  Portfolios designed to generate income in retirement usually combine four key investing elements: preserving principal, maintaining growth potential, maintaining flexibility and access to their money, and providing a guarantee(2) to protect against income shortfalls.  How these factors are balanced can influence an investor's retirement lifestyle and asset mix and how long retirement money may last.

Using all of these investor inputs, the Evaluator attempts to create – in real time – several strategies for generating the desired stream of income for an investor to consider.  The baseline strategy, called the Fidelity Target Income Mix(SM), is an investment combination that seeks to provide efficient use of the investor's retirement savings for his or her situation.  Alternative strategies also are provided to help address investor preferences so they can better understand the potential benefits and trade-offs of one income mix relative to another.  Each strategy then leads to a model portfolio of products that may include a mix of stocks, bonds and cash, as well as annuities.  This approach enables the investor to see how retirement assets can work together to help withstand market volatility and down markets over time.

The Evaluator also provides extensive editing capabilities to allow investors to modify the proposed strategies and substitute other retirement income products they might prefer, such as bond ladders, target date and asset allocation funds, managed accounts, and fixed and variable annuities into the strategy.

At the end, each investor will receive a plan of action for generating retirement income from their retirement savings, including a rationale for the overall strategy that includes the products modeled. Once investors receive their plan, they can then work with a Fidelity investment professional to revise it or put the plan into action, or they can implement it independently.  While the Evaluator can be used independently online, Fidelity suggests using the Evaluator in conjunction with a discussion with a Fidelity investment professional over the phone or in person to receive the full benefit of

the program.

Emotional Responses to the Retirement Transition Can Impact Planning Success

A recent Fidelity study(3) found that 62 percent of pre-retirees heading toward retirement feel anxious or stressed about making the transition from saving for retirement to living off those savings in retirement.  Despite that concern, three out of four (75 percent) pre-retirees do not have a formal retirement income plan in place that could help alleviate some of the anxiety.

To provide insights into the emotional and behavioral responses investors often have to retirement income planning, and how their actions can directly impact whether they achieve their retirement goals, Fidelity is working with Dr. Laura L. Carstensen, director of the Stanford Center for Longevity, who is speaking alongside Fidelity at the program's launch events this week.

"How a person engages emotionally with the transition into retirement can greatly affect the planning process, and ultimately the success of the overall retirement experience," explains Dr. Carstensen.  "Many of us have an innate fear of old age that keeps us from being able to imagine what our lives will be like, or causes us to automatically envision ourselves as much older, frail and on our own – even though modern medicine is keeping many people healthy and active well into their 70s and 80s. As a result, people often either plan too conservatively or do not plan at all."

Holistic Program Helps Investors More Easily Navigate Transition

In addition to the Fidelity Income Strategy Evaluator, and the 200 educational events being hosted across the county and over the Web for the public and Fidelity's workplace plan participants in February, Fidelity's income planning program also includes the following components, all free of charge for both Fidelity customers and non customers:

  • The Fidelity Guide to Retirement Income Investing ( new online material that includes 13 different interactive modules to help investors learn more about key considerations associated with creating a retirement income plan and selecting an income strategy.

  • One-on-one consultations with Fidelity investment professionals.

  • A new series of Retirement Income Viewpoints: educational articles with content focusing on three key components related to the income planning process, entitled "Taking On Retirement's New Normal," "Smart Strategies for Retirement Income" and "How to Efficiently Turn Savings into Income."

  • Workplace-focused educational resources: To date, over 25,000 of Fidelity’s recordkept workplace retirement plans have adopted the Income Strategy Evaluator, providing access to more than 10 million plan participants(4). Additional resources are being made available to employers, including a thought leadership white paper entitled “Retirement Income Guidance Strategies: Helping Employees Move from Savings to Spending,” a series of educational articles, and an online educational resource center with materials they can share with employees to help them with the retirement transition.

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