Target date funds
solve one problem
Next-generation target dates with fixed annuities can solve another.
Time to read: 3 minutes
TIAA RetirePlus® is a default solution that lets sponsors bake in downside protection using a guaranteed asset to help safeguard participant savings.
No one can predict whether their investments will suddenly dip—or rally—just before they need to make critical retirement withdrawals. It doesn’t take a full-blown crash to upend retirement playbooks, either.
Flash back to 2022, when both stocks and bonds ended the year down by double-digits, a wicked combination for soon-to-be retirees. The typical, conservative target date fund (TDF)—designed specifically for people a few years from retirement—dropped more than 15%.1
One-two punches this sharp are rare for diversified portfolios. Even so, they underscore the danger of sequence-of-returns risk, where a retiree’s portfolio facing steep declines early in retirement might never recover. One reason is that making regular investment withdrawals at lower prices leaves fewer assets to participate in any subsequent recovery.
Extreme volatility—even if it’s short-lived—can also fan anxiety that leads savers to abandon long-term financial plans. Take April 2025: Trade-war worries and a 19% decline in the S&P 500 large cap stock index triggered widespread selling.2 Though the market snapped back to a new record high in less than three months, brokerage activity and investor surveys suggest many people who sold in the pullback likely missed some or all the rebound.3 Given the behavioral risk that market shocks pose for workers approaching retirement, employers are increasingly looking for structural approaches that help protect savers' portfolios.
Annuities complement bond funds within target date glidepaths
This year marks the 20th anniversary of the law that lets employers automatically invest on an employee’s behalf—by default—in diversified assets if the employee makes no choice themselves.4 While standard target date strategies have helped millions of workers save and grow wealth, the time has come for them to work harder as qualified default investment alternatives (QDIAs).
Source: TIAA (as of Sept. 30, 2025)
Retirement plan fiduciaries are laser focused on ensuring their default investments can weather all types of markets. Conversations among plan sponsors, investment committees, and consultants increasingly mention that adding a guaranteed asset to a target date strategy can help limit downside risk and reduce portfolio-level volatility—without harming returns. Lowering volatility is possible when glidepaths replace part of the asset allocation that can gain or lose value—bond funds—with an asset that grows in all market conditions and won’t lose value.
A close look at the
The evolution of target dates: Minimizing portfolio volatility with annuities
Asset managers have long offered variations on a stock and bond mix for target date strategies.8 Their goals are to increase diversification, potentially drive higher returns, and mitigate risk.
But adding different types of investments to a target date strategy doesn’t guarantee lower risk for retirement plan participants unless what’s being added is part of a guaranteed asset class, namely a fixed annuity. Protected growth in any market environment, through a guaranteed fixed annuity, improves portfolio resilience and leads to better outcomes. And the promise of stable returns without bond fund fluctuations can help address the turbulence that sometimes prompts retirement savers to make emotionally-driven changes to their portfolios.
63% of the time, target-date glide paths that included TIAA Traditional outperformed those that didn’t.
Research from Charles River Associates shows that adding fixed annuities to a target date glidepath has historically increased the likelihood that a saver enters retirement with a bigger balance than with a standard glidepath. Indeed, embedding
Spotlight on TIAA RetirePlus
TIAA offers the benefits of in-plan fixed annuities in numerous ways, to allow flexibility for the unique needs and requirements of plan sponsors. One option is TIAA RetirePlus, a QDIA-eligible, models-based default investment solution.
Like a standard TDF,
Crucially,
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1 Morningstar, “Target-Date Strategy Landscape: 2023.” March 28, 2023. Refers to the median 2022 performance of 2025-vintage, U.S.-listed target date funds.
2 Bloomberg and TIAA Wealth Chief Investment Office, as of Sept. 30, 2025. The S&P 500 fell 19% between Feb. 19 and April 8, 2025. It hit a new all-time high on June 27, 2025.
3 See: S&P Global Market Intelligence: “Institutional and retail investors offloaded a combined net of $27 billion in US stocks in early April,” April 17, 2025. See also: “Bearish” sentiment, measured by the American Association of Individual Investors’ weekly survey of individual investors about the short-term outlook for stocks, on April 3, 2025, hit its highest level since March 2009.
4 The Pension Protection Act (PPA) of 2006 “made it clear to all DC plan sponsors that automatic enrollment is a legitimate plan design feature,” and “encouraged adoption of automatic enrollment by establishing a safe harbor from nondiscrimination testing and for plans using certain automatic enrollment designs, and a fiduciary safe harbor for the investment of automatic contributions,” according to the Investment Company Institute (ICI). See: ICI, “Ten Years After the PPA, the Path to Retirement Saving is Easier.” Aug. 22, 2016.
5 Assumes single contribution of $10,000. Uses actual monthly returns for the TIAA Traditional Annuity Retirement Choice (RC) and Retirement Choice Plus (RCP) contract for a June 1, 2006 contribution, the date of the inception of the RCP. Past performance is not a guarantee of future results. There is no assurance that additional amounts above the TIAA Traditional Annuity’s guaranteed minimum rate will be declared in the future.
6 The Bloomberg U.S. Aggregate Bond Index (the “Bond Index”) has no expenses subtracted from its returns. TIAA Traditional does not have any explicit expense charges but may impose surrender charges on certain withdrawals. There are substantial differences between intermediate-term bond indices and fixed annuities, including differing investment objectives, costs and expenses, liquidity, safety, guarantees or insurance, and fluctuation of principal or return. It is not possible to directly invest in an index. Past performance is not a guarantee of future results. There is no assurance that additional amounts above the TIAA Traditional Annuity’s guaranteed minimum rate will be declared in the future.
7 Guarantees are subject to the financial strength of TIAA.
8 For example, the Nuveen Lifecycle Target Date Series (formerly the TIAA-CREF Lifecycle Fund Series) first included direct real estate investments in 2017. See press release titled: “Nuveen enhances target-date fund offering with direct real estate allocation,” April 20, 2017.
9 Source: TIAA Institute, Research Dialogue, Issue no. 230, July 2025, “An Update to: A Lifecycle Analysis of the Performance of TIAA’s Traditional Annuity in a Target Date Fund”, An extension of Research Dialogue Issue no. 206; March 2024 by Conrad Ciccotello (University of Denver), Miguel Herce (Charles Rivers Associates Intl.), and Mark Meyer (Charles River Associates Intl.). Past performance is not a guarantee of future results.
You should consider the investment objectives, principal strategies, principal risks, portfolio turnover rate, performance data, and fee and expense information of each underlying investment carefully before directing an investment based on the model. For a free copy of the program description and the prospectus or other offering documents for each of the underlying investments (containing this and other information), call TIAA at 877-518-9161. Please read the program description and the prospectuses or other offering documents for the underlying investments carefully before investing.
This material is for informational, educational or non-fiduciary sales opportunities and/or activities only and does not constitute investment advice (e.g., fiduciary advice under ERISA or otherwise), a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations to invest through a model or to purchase any security or advice about investing or managing retirement savings. It does not take into account any specific objectives or circumstances of any particular customer, or suggest any specific course of action.
No registration under the Investment Company Act, the Securities Act or state securities laws—the model is not a mutual fund or other type of security and will not be registered with the Securities and Exchange Commission as an investment company under the Investment Company Act of 1940, as amended, and no units or shares of the model will be registered under the Securities Act of 1933, as amended, nor will they be registered with any state securities regulator. Accordingly, the model is not subject to compliance with the requirements of such acts, nor may plan participants investing in underlying investments based on the model avail themselves of the protections thereunder, except to the extent that one or more underlying investments or interests therein are registered under such acts.
No guarantee – Neither the models nor any investment made pursuant to the models are deposits of, or obligations of, or guaranteed or endorsed by TIAA or their affiliates (except with respect to certain annuities sponsored by TIAA or its affiliates), or insured by the Federal Deposit Insurance Corporation, or any other agency. There is no guarantee that the underlying investments will provide adequate income at and through retirement and participants may experience losses. Participants should not allocate their retirement savings to the underlying investments unless they can readily bear the consequences of such loss.
Assets allocated to the underlying investments based on the model will be invested in underlying mutual funds and annuities that are permissible investments under the plan. Some or all of the underlying investments included in the model may be sponsored or managed by TIAA or its affiliates and pay fees to TIAA and its affiliates. In general, the value of a model-based account will fluctuate based on the performance of the underlying investments in which the account invests. For a detailed discussion of the risks applicable to an underlying investment, please see the prospectus or disclosure document for such underlying investment.
Fixed annuities and bonds are distinct financial products. Both provide reliable credited interest and income, but may not protect against inflation. A fixed annuity is an insurance contract issued by an insurance company offering tax-deferred guaranteed interest accumulation, principal protection, guaranteed income for a specific period or for life to protect against longevity risk, and may include a death benefit. Guarantees are subject to the financial strength of the insurer. Some fixed annuities are complex, with additional benefits available for an extra cost, and have liquidity restrictions or charges. The TIAA Traditional fixed annuity expenses are reflected in its credited rate - there are no additional fees and charges. TIAA may increase income throughout retirement. A bond is a market-based investment issued for a specified duration that is more liquid than most annuities, has transparent pricing/yield data, disclosed expenses, and is subject to credit risk of the issuer. There is a wide variety of credit qualities and maturities available and flexibility in choice of issuer, maturity, and duration. Principal is usually returned upon maturity, but bond value can fluctuate and be subject to volatility risk due to interest rate changes, market sentiment and bond duration sensitivity. Income from some bonds may be tax-exempt. Bonds do not protect against the risk of outliving your savings and include risk you cannot reinvest at similar/better rates when a bond matures. Bonds have no death benefit but can be passed directly to heirs with a step-up basis.
The Bloomberg U.S. Aggregate Bond Index reflects the average experience of only the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. Over the long-term, the credited interest rates of TIAA Traditional have been similar to returns of this Index, with less volatility due to the diversified investments of TIAA’s large general account which support TIAA’s fixed annuity credited rate, and which invests in nearly every type of portfolio asset available in the market, not just the bond market. You cannot invest in an index; nor can you invest in TIAA’s general account.
Converting some or all of your savings to income benefits is an irrevocable decision once benefit payments begin.
TIAA RetirePlus Select® and TIAA RetirePlus Pro® are administered by Teachers Insurance and Annuity Association of America (“TIAA”) as plan recordkeeper. TIAA-CREF Individual & Institutional Services, Member FINRA and SIPC distributes securities products. SIPC only protects customers' securities and cash held in brokerage accounts. TIAA and CREF annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY, respectively. Each is solely responsible for its own financial condition and contractual obligations. Transactions in the underlying investments invested in based on the models on behalf of the plan participants are executed through TIAA-CREF Individual & Institutional Services, LLC.
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TIAA Traditional is a fixed an annuity issued by Teachers Insurance and Annuity Association of America (TIAA), 730 Third Avenue, New York, NY, 10017: Form series including but not limited to: 1000.24; G-1000.4; IGRS-01-84-ACC; IGRSP-01-84-ACC; 6008.8. Not all contracts are available in all states or currently issued.