Saving for retirement is only half the equation. This TIAA Institute research brief makes the evidence-based case for why guaranteed lifetime income must be a core component of retirement plan design, not just during accumulation, but throughout the entire retirement journey.
Summary
Drawing on multiple research studies, this brief presents three complementary themes that together build a compelling case for lifetime income in retirement plans. First, incorporating guaranteed lifetime income products into target-date glidepaths produces superior outcomes in 93% of scenarios, with participants maintaining significantly higher residual balances compared to standard portfolios. Second, behavioral research reveals that retirees spend 80–85% of lifetime income but only about 50% of withdrawable savings, a pattern of systematic underconsumption that reduces quality of life and leads to unintended bequests. Guaranteed income gives retirees a psychological "license to spend." Third, participant demand has grown dramatically, with 93% of 401(k) participants now saying it is important for their plans to offer guaranteed income options, up from roughly 60% in 2021, with strong and consistent interest across all generations and demographics. Together, these findings demonstrate that lifetime income is not simply another investment option, it is the missing ingredient that transforms adequate savings into true retirement security.
Key Insights
- Portfolios incorporating guaranteed lifetime income outperformed standard portfolios in 93% of scenarios, with participants maintaining an average of $78,327 more in residual balances.
- Retirees spend approximately 80–85% of lifetime income but only 50% of withdrawable savings, demonstrating a powerful behavioral barrier that guaranteed income uniquely overcomes.
- Converting savings to lifetime income could increase retirement consumption by as much as 80% for married households and 33% for single households.
- 93% of 401(k) participants say it is important for their plans to offer guaranteed income options, a dramatic rise from approximately 60% in 2021, with demand consistent across all generations and income levels.
- 95% of target-date fund investors say including a guaranteed fixed annuity component in their target-date fund would be valuable, signaling strong support for integrating lifetime income into the most widely used default investment vehicle.
