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This Company Leads The Way In Offering Its Employees Secure Income In Retirement

This company leads the way in offering its employees secure income in retirement

Retirement savings is a marathon, not a sprint.

United Technologies Corp. UTX, +0.58% is the first major company to offer a secure lifetime income default option within their defined contribution plan.

In 2010, UTC closed its cash balance defined benefit (DB) plan to new hires (after closing a traditional DB plan in 2003), but wanted to make its defined contribution plan function more like a DB plan. The management rejected the old savings-and-investment approach and decided on three principles for the plan: 1) keep costs low; 2) keep it flexible; and 3) ensure that participants will have adequate income in retirement.

The company elected an AllianceBernstein Lifetime Income Strategy. This product is an individual target date account with an optional guaranteed minimum benefit. The withdrawal amounts are set to last throughout a participant’s retirement, even if the market falls or the account’s assets run out. The individual has access to the market value at all times.

The company viewed this approach as the best compromise between an immediate fixed annuity, which would have provided the highest level of income, and a systematic-withdrawal plan, which would have ensured the greatest level of liquidity.

Allocations to the lifetime income portfolio – the default – begin at age 48 and gradually increase…

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