Fidelity to Add Target-Date Fund With Embedded Annuity to 401(k) Lineup, Following BlackRock and Vanguard

Fidelity Investments said it will add a new annuity-linked option for investors in 401(k) plans, becoming the latest major asset manager to test how guaranteed income products can be packaged inside more traditional retirement offerings. The new offering is scheduled to begin in early 2027, according to coverage of the plan, and is expected to give investors access to a target-date fund that includes an embedded annuity feature.

The structure described in the industry report points to an arrangement built around a target-date fund, a diversified portfolio that automatically adjusts its stock and bond mix over time as the investor approaches a chosen retirement year. In this case, the target-date fund would also include an annuity embedded within the investment option, meaning part of the benefit is designed to function more like insurance-based payout coverage than like a standard fund-only return profile.

Fidelity’s approach would use partners Nationwide and New York Life, the report said, indicating the annuity component relies on insurance-industry capabilities. The effort also sits inside a 401(k) implementation framework that uses collective investment trusts, which are pooled investment vehicles typically used by plan sponsors and advisers as an alternative to exchange-traded or mutual-fund structures.

The development comes after BlackRock and Vanguard were already described as offering similar annuity-inclusive options in 401(k) plans. That shared direction highlights a broader market experiment: asset managers and insurers are looking for ways to make retirement payouts feel more secure without requiring workers to separately shop for annuity contracts after leaving a job.

For plan participants, the practical promise of an embedded annuity is that it can provide an income component that is intended to be more stable than withdrawals based purely on market returns. For plan sponsors and recordkeepers, the appeal is that these products may offer additional features that can improve perceived retirement readiness within the plan’s default or menu offerings, while keeping the solution integrated into the plan platform.

Fidelity did not detail, in the coverage referenced here, the specific fees, payout terms, annuity election mechanics, or how the embedded annuity benefit would be reflected in day-to-day fund performance reporting. The report also did not indicate whether the offering would be positioned for broad enrollment, used mainly for default strategies, or offered as an elective option within 401(k) menus.

As the major firms expand the toolkit, the key commercial question for the industry is whether embedded-annuity target-date funds can balance complexity with transparency. These products blend insurance and asset-management concepts, and their regulatory, disclosure, and suitability expectations can be more demanding than for traditional target-date funds.

Over the near term, investors and advisers may watch for Fidelity’s formal product filings or plan-specific disclosures in the lead-up to the early-2027 launch, including how the annuity feature is explained to workers and how partners Nationwide and New York Life structure the insurance component. The market will also look for whether BlackRock and Vanguard’s initial offerings drive increased uptake that Fidelity can replicate, or whether these products remain concentrated among certain plan sizes and plan sponsor types.