Vanguard and TIAA launch guaranteed lifetime income solution for 401(k)s

• Key Insight: Discover how Vanguard and TIAA embed guaranteed lifetime income into target-date collective trusts.
• What's at Stake: Plan sponsors face new fiduciary choices, operational complexity, and retirement adequacy implications.
• Supporting Data: 93% of 401(k) participants say lifetime-income options are important, per TIAA research.
• Source: Bullets generated by AI with editorial review

As employees struggle with extending their savings well into retirement, a new collaboration between Vanguard and TIAA is set to accelerate retirement security by embedding guaranteed lifetime income directly into workplace savings plans. 

Vanguard and TIAA are launching a Vanguard Target Date Collective Investment Trust, a retirement fund option designed as a trust rather than a mutual fund. The product will embed with TIAA's Secure Income Account — a fixed annuity that offers guaranteed returns during the accumulation years and the ability to convert savings into lifetime income at retirement. 

While the majority of private sector employees have a 401(k) plan, a lack of guaranteed income has left a savings gap: Research from the Employee Benefit Research Institute shows that at least 40% of American households now risk running short of money in retirement. 

Read more: How benefit managers can maximize 401(k) plans

Employers and policymakers have had to rethink how to help workers transition from savings to lasting income — for example, the SECURE Acts removed limitations to offering annuity solutions within a retirement plan. And demand has steadily increased, with 93% of 401(k) participants saying lifetime income options are important to them, according to research from TIAA. 

"Retirement security is the fulfillment of the American dream," Thasunda Brown Duckett, president and CEO of TIAA, said in a release. "But for far too long, we've asked too many Americans to save diligently without giving them a clear pathway to transform those savings into the retirement they've earned." 

A real-world example

TIAA shared an example of how the product could create lifetime income: A 67-year-old employee has a $1 million portfolio invested in the Vanguard target-date fund that includes the TIAA Secure Income Account. If the employee chooses to annuitize 25% of their balance, they could receive roughly $1,670 per month for life. When combined with an estimated $2,000 from Social Security, the participant would have $44,000 per year in guaranteed income to cover core expenses like housing, food, and utilities. The remaining $750,000 stays invested, offering flexibility and growth potential while also supporting additional withdrawals.

This hybrid model — stable income paired with long-term growth — solves a core challenge that 401(k)s have never addressed, according to Colbert Narcisse, chief product officer, head of insurance solutions and new markets at TIAA: Turning savings into a consistent paycheck employees cannot outlive.

"Target dates that include annuities are the most important development in defined contribution plans in a generation," Narcisse said in the release. "We are finally solving the income challenge that 401(k)s were never designed to address."

Read more: Employers boost financial wellness efforts as worker stress rises

As employees demand simple, secure retirement solutions, employers face increasing pressure to address financial stress and rising retirement delays. With regulatory clarity, strong participant demand and ready-built infrastructure, lifetime income is rapidly becoming the next major evolution in plan design.  

"Target dates revolutionized how Americans save for retirement," Narcisse said. "Target dates that include annuities will revolutionize how they live in retirement."