For Retirement Security, Income Is the Outcome

Colbert Narcisse

We stand at a pivotal moment in retirement planning. As our society transforms and lifespans extend dramatically, we must fundamentally reimagine how we help Americans secure their financial futures through retirement. The challenge is not just helping people accumulate savings—it’s ensuring they have secure income that lasts as long as they live.

When defined contribution plans were first instituted in 1978, most individuals were not expected to live more than 20 years in retirement. Today, more than 4 million Americans will turn 65 each year through 2027, according to LIMRA, and a 30-plus-year retirement is no longer uncommon.

At TIAA, the number of participants who are at least 100 years old and currently receiving monthly annuity checks from us is growing steadily each month, underscoring Americans’ longevity in retirement. Meanwhile, traditional defined benefit plans that once guaranteed lifetime income have largely vanished. Only 12% of private sector workers have access to a defined benefit plan today, down from 70% in 1975, according to the Georgetown Center for Retirement Initiatives.

The ‘Guarantee Gap’

This shift has created what we call the “guarantee gap”—the absence of secured lifetime income solutions in the defined contribution system that now serves as America’s primary retirement vehicle. While DC plans excel at helping workers accumulate savings through automatic enrollment and target-date funds, they leave retirees on their own to manage the far more complex challenge of making those savings last a lifetime or converting them into income.

Recent legislation and actions from lawmakers and regulators—including bipartisan, bicameral bills introduced this Congress and an executive order that calls for greater inclusion of lifetime income in DC plans—are encouraging signals that retirement policy matters and is a priority. The path forward requires targeted reforms following a clear framework: access, automation and education at moments that matter.

The Framework

First, we must remove barriers that prevent employers from offering guaranteed lifetime income solutions in their workplace retirement plans. As part of this, we can optimize DC plan design by ensuring it offers a menu of income solutions—including guaranteed lifetime income, systematic withdrawals and managed payout options—not just lump-sum distributions. An average of nearly seven out of 10 surveyed workers told Nuveen, a subsidiary of TIAA, that they would be likely to select an in-plan annuity option if one were available, preferring to make smaller contributions over time to fund that annuity, rather than purchasing one with a large lump sum at retirement.

Second, we need thoughtful default options that guide good decisions automatically. Congress should encourage employers to include lifetime income options as qualified default investment alternatives; provide more income education to savers; and prompt employers to provide retiring employees with a menu of income options. This would give workers the same level of automated support in generating retirement income that they currently receive in accumulating savings.

Third, education for workers about longevity risk must be a priority. Nearly two-thirds (64%) of adults surveyed by Allianz earlier this year said they worried more about running out of money than dying, yet research showed that only about half of workers expecting shorter retirements saved regularly, compared with more than 70% of those anticipating 20-year retirements. We must encourage employers and plan fiduciaries to provide comprehensive retirement income education covering life expectancy at retirement, financial risks and Social Security optimization strategies. We believe education should begin at age 50.

Delivering on Fundamental Promise

The urgency cannot be overstated. With more than 30 million Baby Boomers now reaching retirement age and with Social Security facing potential benefit cuts as early as 2033, there is a narrow window to act. The technology and regulatory framework already exists to create a retirement system that does not abandon workers at the moment they need security most.

By closing the guarantee gap through comprehensive reform—combining better education, expanded access to guaranteed income solutions, and thoughtful defaults—we can ensure that the U.S. retirement system delivers on its fundamental promise: not just helping people save for retirement, but helping them live securely through it.

Colbert Narcisse is the chief product and business development officer for TIAA, which offers annuities, and he is accountable for leading product management, innovation and growing new markets.

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of ISS STOXX or its affiliates.