Research Shows Workers Favor Guaranteed Income Over Financial Wellness Tools

Almost half of respondents agreed annuities can offer safety and stability, though other research shows in-plan defined contribution annuities are not picking up among employers.


Retail sales of annuities have been booming on higher interest rates even as new data shows that workers want lifetime income products more than other employer resources aimed to boost their retirement readiness.

But a disconnect remains for in-plan defined contribution annuities, as other research shows that employers are still hesitant to offer annuities in part due to fiduciary concerns.

Among the resources available to workers from their employers to help them “pivot” into retirement, 67% of respondents are most focused on a having their employers implement a guaranteed income product—ahead of access to financial consulting, retirement calculators and in-person or town hall-style education forums—according to the U.S. research snapshot of the State Street Global Advisors 2022 Global Retirement Reality Report.

The U.S. research slice revealed workers’ thoughts on annuities, showing 46% of workers agreed or strongly agreed with the statement that annuities provide safety and stability, 40% agreed or strongly agreed with the notion of annuities being an essential part of providing income in retirement, 32% agreed or strongly agreed with annuities having a bad reputation for limiting access to savings and 27% of respondents said they don’t represent good value for money.

“Of the global sample, Americans were most aware of and keen on annuities, with some considering the product tantamount to retirement income,” states the report’s closing thoughts section, which attempts to offer insights for employers, advisers and policymakers to support greater retirement plan access, coverage and income.

Although some employers have changed their 401(k) plans for 2023, they have generally not embraced additional enhancements that were provided by legislation passed in 2019, data released this year by Alight Solutions shows. Employers largely have not, according to research, embraced adding in-plan annuities to defined contribution plans, which was one of the legislative provisions of the Setting Every Community Up for Retirement Act of 2019.

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Retail Annuities Ride On

The lack of in-plan options has not slowed annuity sales for the insurance industry, which has seen a huge influx of flows from outside the industry, says Mike Downing, chief operating officer and chief actuary at Athene Holding Ltd, which had the highest annuity sales as tracked by industry association LIMRA when looking across all sectors in Q3 2022. 

“One of the cornerstone qualities of retail annuities is the speed at which new purchases react to rising rates,” Downing says. “As a company, when we look at how we’re going to look at our competitiveness, we look at the current investment environment. If we were to invest money today, what do we think we can earn and what can we guarantee to policy holders?”

Fixed income annuities have led the charge, as purchases can lock in relatively high rates of return, with some north of 10%, Downing says.

“We expect the trends and conditions to still continue to remain very strong in the insurance sector,” Downing says. “In particular for Athene, because of the strength of our balance sheet and low manufacturing cost we expect to be able to maintain very competitive position in the market.”

Retirement Expectations?

Retirement income may be a factor as more people expect to live longer in retirement. The most popular retirement age for U.S. workers is from ages 65 to 69, and 26% of Americans expect to live past 90, SSGA data shows.

Alongside this longevity expectation, 30% of U.S. workers showed the highest concern for making their money last in the later years of retirement, defined as age 80 and above, and for later-life health care costs, SSGA research finds.

The SSGA report also revealed that 84% of U.S. workers expected to enjoy some variation of retirement — 59% of respondents said they expect to have a full retirement and 25% said their retirement plan does include partial work. Among workers, 10% said they did not think retirement would ever be financially feasible, and of those who don’t see retirement as a practical reality, 6% are eager to stay engaged in work life, according to SSGA.

The feasibility of earlier retirement may come down to how the industry can solve for decumulation, according to Athene’s Downing.

“In the qualified space the holy grail the default option, and that’s where I think there is a lot of interest [in annuities],” Downing says. “A target-date fund is actually a flawed product, because although it targets by age, there’s no natural protection. There’s no protection again rising rates, because a large amount of that money is in bond funds, so as rates rise the markets collapse.”

While TDFs demystify the accumulation phase, he says, they don’t deal with decumulation as retirees start spending down. 

“To me there’s a better mousetrap out there,” he says. “We just have to figure out some of the regulatory barriers or some of the rule regimes that exist in qualified plan space versus the insurance space. Once somebody can figure that out I think you’ll see a whole new type of retirement plan in the 401(k) space.”


Data for the State Street Global Advisors 2022 Global Retirement Reality Report was gathered by global analytics firm YouGov. An online survey was used to collect information from from 3,553 individual retirement savers with access to employer-sponsored defined contribution plans between July 20 and August 22, 2022.

Fiduciary Concerns Continue to Stymie Annuities in 401(k)s

Employers have embraced 401(k) plan benefits changes for 2023, but are still shying away from annuities, according to Alight.



Employers have not 
embraced adding in-plan annuities to defined contribution plans, which was one of the legislative provisions of the Setting Every Community Up for Retirement (SECURE) Act of 2019, according to new data from Alight.

“The SECURE Act did little to quell employer concerns about annuities,” the Alight report stated. “Even though the SECURE Act was designed to help relieve fiduciaries’ responsibilities for selecting an in-plan annuity provider, nearly half of employers say fiduciary concerns are a major reason they don’t have annuities in their plans.”

Alight’s data showed that among employers, 47% cite fiduciary concerns as a major reason for not adding annuities. The figure has remained stagnant since the 2018 report, Alight found. Most (44%) of employer respondents are waiting to see how the market evolves, and an equal percentage cite difficulty with participant communication. Fully 38% of respondents blame operational or administrative concerns, and 32% cite participant use concerns as major reasons for abstaining from annuities, the Alight research showed.

Alight data showed 12% of employers already have annuities in their defined contribution plan, 3% are very interested in annuities for the plan, 35% are moderately interested and 51% are not at all interested in annuities in their defined contribution plan.

Plan sponsors are, however, taking other actions intended to improve retirement outcomes for participants. Many were driven to make changes to their 401(k) and other defined contribution plans because of inflation, hammered stock markets and the lingering impact of the COVID-19 pandemic, the 2023 Alight Solutions Hot Topics in Retirement and Financial Wellbeing Report found.

The current economic environment has spurred five out of six plan sponsors to change their 401(k) plans in 2022 or plan to in 2023, the report found.

“Employers’ top initiatives are enhancing their financial wellbeing programs, measuring the competitiveness of their retirement plans and expanding inclusion and diversity efforts,” the report stated.

Employers are providing resources, including guidance on investing when inflation is high, and are likely to increase communication to workers about investing in the current environment, as 87% reported being very or moderately likely to expand their financial well-being program in 2023, the research showed.

The largest group of employers, 55% of those responding, said they have already or are expected to provide participants with access to advisers who offer guidance on investing, Alight Solutions found. Another 29% either added in 2022 or are expected to include in 2023 an inflation-protection specific investment such as Treasury inflation protected securities in the plan, 25% of employers said they provide tools than can model inflation scenarios and 13% said they focused on communicating to participants how to invest in high-inflation environments, the research showed.

In 2023, 61% of employers said they plan to offer budgeting assistance, compared to 35% that did in 2018, the research shows.

Among employers responding to the survey, 47% said they are very likely to focus on financial well-being of employees—with strengthened plan features, planning, resources communication, mobile apps or online tools—beyond retirement decisions, 40% are moderately likely and 13% not at all likely to do so, the research showed.

Alight also found that 38% of employers say they are very likely to expand inclusion and diversity efforts in retirement and financial well-being plans, 39% say they are moderately likely and 24% say they are not at all likely. Finally, 42% of employers reported they are very likely to measure the competitive position of the retirement program, with 35% moderately likely and 24% not at all likely.

“We did not ask how employers are increasing benefits,” says Rob Austin, director of research at Alight Solutions, in an email. “Anecdotally, some plan sponsors are providing richer matches or relaxing eligibility and vesting requirements.”

The Alight report was based on data acquired from 90 employer respondents employing more than 3 million workers. The survey was administered by Alight in September 2022.

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