With the gradual disappearance of the guaranteed-for-life payouts from defined benefit pensions, plan sponsors have been searching for investments that would help their participants make sure their 401(k) savings don't expire before they do. Until recently, the hunt yielded few solutions aside from variations of traditional annuities. But don't give up hope. A new breed of guaranteed minimum withdrawal benefit (GMWB) plans is emerging that ties the guaranteed lifetime withdrawal benefits of an annuity to the popular target fund approach and produces an investment option for older workers.

The latest GMWB, set to launch in the second quarter, is a product jointly developed by UBS Global Asset Management and insurer Genworth Financial Inc. The yet-to-be-named option promises an employee a life-long disbursement of a minimum 5% of his portfolio, even if the total distribution exceeds the portfolio's value. But unlike the fixed annuity approach, the payout would increase as the portfolio increases in value. "It offers the advantages of annuities, but with the flexibility, simplicity and institutional pricing of a collective fund," says Cindy Vogl, senior product manager for UBS global asset management. "Participants retain control over the assets, which can continue to grow after retirement."

They also can withdraw additional funds in an emergency or cancel the feature at any time. She says the price is right, with combined management and insurance fees on par with mutual funds and lower than retail annuity products with guaranteed withdrawal benefits. Out of the gate first, however, was SponsorMatch, a target-date GMWB from Barclays Global Investors. Announced in October, SponsorMatch bundles three portfolios, including an annuity, into a single asset-management strategy. SponsorMatch is designed for employer contributions; the UBS product is employee funded. Retirement experts expect target-fund GMWBs to be a hit. "

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