Many investors, for better or worse, have given up on the idea that they can effectively manage their own money. Others have decided to retain control over a portion of their assets but want someone else to manage the remainder with the promise of a base guarantee and a lifetime stream of income in return. Products have been built and readily marketed to individuals for many, many years on this front (you would know them as fixed or variable annuities). These individiual annuity products are often the target of criticism for excessive fees and other failings - and in many cases they deserve it.

A wrinkle on this theme has fairly recently emerged in the 401(k) marketplace in the form of retirement income products. These products attempt to provide the same solution (lifetime income with a base guarantee) and most also offer a potential upside to the base guarantee by linking performance of the product to the performance of a balanced portfolio. In a sense they are a "group" version of the individual annuity products and are available for contributions or transfers in a 401(k) plan.

There are many potential positives to these retirement income products as they do offer:

• Third party investment management for those who don't want that responsibility
• A base level guarantee that could help investors avoid years like 2008
• Upside from the base level guarantee if the underlying investment outperforms the base guarantee
• A lifetime stream of income

As with anything there are also potential downsides to these products including:

• A lack of portability for the Plan should it change recordkeepers (these products are not widely available and many larger recordkeepers have resisted adding them as they compete with target date funds)
• The varied, often confusing, terms of the products
• The expenses involved
• The financial health of the insurers offering the products
• Educating participants about the products and its terms
• Potential complexity that this product adds to the operation of the plan and the plan documents

We are fully versed in the pros and cons of the available products and have also recently put together a participant education (pdf) piece that explains the concept at a high level.