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Data & Research January 30, 2026
Guaranteed Income in Target-Date Portfolios Boosts Retirement Spending
Target-date portfolios with guaranteed income could effectively manage retirement risks, according to BlackRock and TIAA.
Reported by Valentina Baez
Adding guaranteed income to a target-date portfolio has the potential to create better retirement spending outcomes, according to separate reports by BlackRock Inc. and TIAA. Scenario testing from both companies suggested a new horizon for conventional retirement fund structures.
“There’s a shift going on in the markets now, where retirement plan advisers are going to be asked to do more than a 4% [yearly withdrawal] rule,” says Nick Nefouse, managing director and global head of retirement solutions for BlackRock’s multi-asset strategies and solutions team. “The market is going to shift from ‘How do I maximize wealth until I get to retirement?’ to ‘What is the actual strategy in retirement?’ A 4% rule is not a strategy.”
In BlackRock Retirement Solutions’ report, “Anchor Your Spending Across Choppy Waters,” two target-date portfolios were stress–tested: one with a traditional investment strategy of stocks and bonds, and another invested in stocks, bonds and a guaranteed income strategy. The scenario simulations indicated that incorporating a guaranteed income investment increases spending for retirees across the board.
The finding was similar to a study for the TIAA Institute conducted by consulting firm Charles River Associates. Of the 27 retirement scenarios studied, a glide path with an allocation to a TIAA Traditional Annuity outperformed, on average, those with allocations to only equities and bonds.
“This research demonstrates that integrating guaranteed lifetime income into target-date portfolios has never been more essential in helping both plan sponsors and their employees build truly secure financial futures,” said Kourtney Gibson, CEO of TIAA Retirement Solutions, in a statement.
TIAA Scenarios
TIAA Institute research conducted by CRA examined 49 years of historical data from 1973 through 2021, showing that under similar economic situations, the TIAA Traditional Annuity substituted for bonds in target-date glide paths led to improved retirement outcomes.
The analysis, first published in 2015, was updated in 2022, 2024 and 2025. Its most recent update added three years of data analysis. The study examined 27 different retirement scenarios with varying start dates and portfolio allocations.
Portfolios with TIAA Traditional had more money left over than those without in more than 93% of scenarios , and portfolios with an added annuity averaged 4.9% higher balances than those without. Additionally, portfolios without TIAA Traditional needed to annuitize more assets to match the guaranteed income levels provided by portfolios with TIAA Traditional.
“Our research shows that replacing some of your allocation to fixed income with TIAA Traditional can lower overall risk by reducing interest-rate risk and adding stable returns—while also offering the option of guaranteed lifetime income,” Gibson said in the statement.
At the end of the saving period, portfolios with TIAA Traditional had higher balances 63% of the time, according to the report.
BlackRock’s Scenarios
When Nefouse started his scenario project for BlackRock about seven years ago, he did not appreciate the role of annuities.
“I just assumed annuities were complex, expensive, illiquid contracts,” he says.
However, as findings from the research unraveled, he realized how critical the annuity market really is.
In the first stress-tested scenario, the hypothetical year prior to retirement mirrored market conditions of the 2008 financial crisis. When guaranteed income was embedded into an individual’s retirement funds, there was a 29% uptick in total amount of spending after 30 years of retirement. Embedding guaranteed income also dropped volatility of spending by 19%.
“I think what surprised me is how effective a fixed annuity would be in managing major risks that we have in retirement,” Nefouse says.
The second scenario simulated upwards and downwards 10-year Treasury rate fluctuations in the year prior to retirement. As in the first scenario, comparing cumulative spending of a 30-year retirement, the portfolio with embedded guaranteed income had an uplift of 33% for a positive shock and 19% for a negative shock.
Additionally, by embedding the guarantee, volatility of spending dropped by 21% in rising-rate environments and by 15% in falling-rate environments.
In the third scenario, market conditions mirrored the high-growth market conditions between 2009 and 2021. It was also assumed that an increase in spending rates reflected higher portfolio returns. From these market conditions, BlackRock found that total spending increased by 19% and there was a drop in volatility of spending by 15% over a 30-year retirement.
When BlackRock added a high annuitization price to the third scenario, the results reflected a total spending during retirement of 4%, the lowest increase of all scenarios, and the volatility of spending dropped to 8%.
“I think we need to change the conversation away from purely accumulation … [to] how do we help the individual with decumulation, with spending? One of the effective tools is insurance,” Nefouse says. “To be clear: It’s not only insurance; it’s insurance in conjunction with bonds, equities and other asset classes as well.”
