Blackrock, Microsoft team up on new retirement tool

While the U.S. is facing an economic fallout, investors are feeling more pressure to save for their retirement. BlackRock Retirement Group Head Anne Ackerley joins Yahoo Finance’s On The Move to weigh in on the company’s new retirement initiative.

Video Transcript

JULIE HYMAN: You're watching "On the Move" on Yahoo Finance. I'm Julie Hyman, alongside Adam Shapiro. Well, markets may have recovered much of their losses thus far this year, but there's still a lot of trepidation around investments, particularly for those who are approaching retirement. We're joined now by Anne Ackerley. She is BlackRock Retirement Group head. She's joining us from New York.

And Anne, I'm curious if you all have sort of changed your approach to how you're thinking about your clients and their retirement right now because there is so much uncertainty given the economy, given that some of the folks you serve may have lost their jobs close to retirement, for example. How have you tried to address some of this?

ANNE ACKERLEY: Sure. Thanks, and thanks for having me on. Look, it is a very difficult time, but what we have been telling people, if at all possible, to stay the course. And I know that can be a tough message, but one of the worst things that you can do, actually, when the markets are so volatile is to get out of the market and maybe miss the rebound. And so at the end of March, the beginning of April, the president of BlackRock, Rob Kapito, did put out a letter to participants saying if there's any way, you know, try to stay the course.

And one of the things we know is that people, the default investment in most retirement plans is a target date fund. It is designed to take you through these types of periods. So if you can, try to stay the course.

ADAM SHAPIRO: Anne, hey, it's Adam Shapiro. Thank you for joining us. I want to bring up what BlackRock announced within the last two weeks, which is the LifePath Paycheck program. And you mentioned target date funds. If you are fortunate to have a 401(k) and you can participate in a target date fund, that's one part of it. But you're doing something that's not been done on this scale that makes it much easier for a retiree to then take those funds and protect their life. I mean, it's an annuity, essentially. Tell us how this all works.

ANNE ACKERLEY: Sure. Last week, we announced, as you said, LifePath Paycheck, which is an investment strategy that is designed to give people simplified access to lifetime income. You know, before, people used to have pensions. They used to have defined benefit plans. Today, with defined contribution, they've really lost that access to guaranteed income. And what we're trying to do is bring back some of the benefits of defined benefit. So it's a target date fund, and it embeds annuity contracts in it so that, when a person retires, if they choose, they can choose to annuitize a portion of their assets, in effect creating their own paycheck for life.

ADAM SHAPIRO: And the key, if I understand this correctly-- correct me if I'm wrong-- right now, my 401(k), if tomorrow I retire, I then have the decision to make about making it-- you know, annuitizing a portion of that money. I pay fees, and I'm locking that money up. What you have now announced allows the person who's, say, 55 to build towards that moment, but then they annuitize without any fees?

ANNE ACKERLEY: Yes, exactly. What we do is we're trying to make it more convenient for people. We're trying to take-- in a, way make some of the choices for people. We're picking the insurance companies. We're picking the age at which you should start buying these. We're helping work through what the price should be. We're determining those sorts of things to make it much simpler for people when they retire-- and let's say that 65-- to be able to then choose, if they want to, to annuitize. So we think about this as cost efficiency, convenience, but still choice.

JULIE HYMAN: And Anne, I'm curious, is this something that was developed over the longer term? Was this in response to this particular moment? And are there any other new products that you all are working on or have introduced at this time, specifically to address some of the concerns?

ANNE ACKERLEY: Sure. So we've actually been working on this for more than 18 months. You may remember we made an announcement 18 months ago with Microsoft, because there is also a technology component to this. So we've been very, very hard at work. You know, one of the things that we've had to do is bring together different members of the ecosystem. Right?

We're working with insurance companies. We're an asset manager. We've had to bring the record keepers along, as well as build the technology. So it was pre-COVID, but we believe that, actually, post-COVID, more and more people will want to have this sort of strategy that will help them get guaranteed income.

ADAM SHAPIRO: And you're working with Equitable and Brighthouse Financial. That's the insurance companies, the annuity side of this. Where do I find the product? If my company has a Fidelity 401(k) system or a Vanguard 401(k) system, where do I find this and take advantage of it?

ANNE ACKERLEY: So your employer is going to have to choose this investment strategy. And so we're working with large-- initially, large employers throughout the United States to give them access to LifePath Paycheck. And then, over time, we'll go to small employers, as well. But for right now, it has to be in your 401(k), and your employer has to offer it.

JULIE HYMAN: Anne, thanks so much for joining us. Good to see you. Anne Ackerley is BlackRock Retirement Group head. She's joining from New York. By the way, we're going to speak to an individual who is close to retirement in just a few, so we'll get some more-- a little more specific perspective on this issue.