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An increasing number of retirement savers favor ‘guaranteed income,’ survey finds

Some fund managers are now promoting annuities

Updated:

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By:
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Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.
wallet and bank cards: Photo by PiggyBank on Unsplash

Photo by PiggyBank on Unsplash

Key Insights

  • 93% of 401(k) savers say it’s important to have guaranteed monthly income options in retirement.
  • 87% believe employers have a responsibility to help workers secure retirement income.
  • Nine in ten participants would value fixed annuities as part of their 401(k) plans.

Decades ago, if you worked for an employer with a retirement plan, it was most likely a defined pension. In retirement, it paid a guaranteed, lifetime income based on your earnings and the time spent on the job.

In the 1990s, employers began transitioning to the 401(k) account, a self-directed investment plan. The amount of money in the account at retirement depended on several factors, including how well you managed your investments.

While some people like to manage their own retirement savings, there’s growing evidence that today’s workers miss the pension plans from the past. A recent survey from Nuveen, the investment manager of TIAA, and the TIAA Institute reveals that workers are increasingly demanding guaranteed income options in their retirement savings plans. 

Among the more than 2,000 401(k) participants surveyed, 93% said it is important for their retirement plans to provide a way to convert savings into guaranteed monthly income that lasts a lifetime. If not a return to pensions, the majority expressed interest in some kind of hybrid.

The research found that 87% of workers think employers have a responsibility to help ensure employees achieve retirement income security, a dramatic shift from just three years ago, when fewer than six in ten expressed the same view.

A return to annuities?

The survey highlighted near-universal interest in fixed annuities, with about 90% of participants agreeing that these products would bring meaningful value to 401(k) plans. Specifically, participants said they would:

  • Welcome the inclusion of a fixed annuity in their plan,
  • Consider saving with one if offered,
  • Use it to secure steady monthly retirement income, and
  • Support target-date investments that embed an annuity component.

Despite this enthusiasm, most 401(k) plans still lack a built-in mechanism to provide guaranteed lifetime income. The 401 (k) system currently has 79 million active participants and $6.8 trillion in assets. The survey suggests retirement savers may be looking for something more.

Nuveen, which sells annuities, believes most retirement plans could include an annuity, promoting it as a “low-cost way to fill the retirement income design gap.”

Before making any decision about your retirement accounts, it’s wise to consult with a trusted and objective financial adviser.