Are Workers Warming Up to In-Plan Annuities?

Surveys show growing interest in 401(k) plans with a guaranteed-income option

Maya Dollarhide and Tamara E. Holmes,

AARP

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Published October 27, 2025

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For most of today’s workers, pensions are a relic of the past. But the appetite for a guaranteed monthly retirement check to supplement Social Security appears to be growing.

According to a recent survey by asset management firm Nuveen and the TIAA Institute, both subsidiaries of financial services company TIAA, more than 9 in 10 workers with 401(k) plans would like the option to convert their savings into a fixed annuity that provides guaranteed lifetime payments. Nearly 9 in 10 say their employers have an obligation to help them achieve retirement security.

That’s a considerable shift in sentiment since 2021, when in a similar TIAA survey fewer than 6 in 10 workers said their employer had a responsibility to help them secure a guaranteed retirement income stream.

What’s changed?

“Since 2021, we’ve had significant volatility in the markets, including 2022, which produced double-digit negative returns for both equities and fixed income,” says Gregory Fox, partner and head of retirement income solutions at investment firm Aon. For people planning to rely on their savings in retirement, the prospect of a bear market eroding the value of IRAs and 401(k) plans is a major concern.

Then there are persistent concerns about inflation, uncertainty about Social Security’s financial future, and “major medical breakthroughs that can impact life expectancies,” such as GLP-1 drugs like Wegovy and Ozempic, Fox adds. All of these factors have contributed to a growing interest in using annuities to avoid outliving one’s money, he says.

A SECURE boost

That interest is attracting corporate attention. In 2023, the United Auto Workers went on strike against the “Big Three” U.S. automakers: Ford, General Motors and Stellantis. One of the union’s primary demands was a return to traditional pensions for all workers. As a compromise, the companies added in-plan annuities to workers’ 401(k) options, allowing them to convert part of their retirement savings into pension-like lifetime payments.

Such arrangements could become more attractive to post-boomer generations as their members near retirement, says Bryan Hodgens, senior vice president and head of research at LIMRA, a trade association serving insurance and financial services companies.

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“Today, 40 percent of retirees have access to a pension plan. The numbers go down substantially each generation,” Hodgens says. “Just 24 percent of Gen X workers have access to a pension, and only 16 percent of millennials will have a pension.”

He and other financial professionals say recent federal legislation focused on retirement security could help fill the pension gap. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019, and SECURE 2.0, which followed three years later, both included provisions to encourage broader use of in-plan annuities.

“Many companies have developed in-plan annuity offerings in a variety of flavors, particularly since the passing of SECURE 1.0,” says Jenny Glowacki, vice president and head of in-plan advice and income at Corebridge Financial.

Changes have included making the annuities portable, allowing account holders to transfer them from one retirement plan to another; eliminating some restrictions on annual annuity payment increases so that in-plan annuities can keep pace with inflation; and enhancing liability protections for plan sponsors to encourage employers to participate.

How in-plan annuities work

“Defined contribution” retirement plans such as 401(k)s put the onus on employees to manage their retirement income after they leave work. That can put retirees at risk of running out of money — for example, if they withdraw too much too soon or a down market reduces their account value.

Annuities are financial products that, at their most basic, turn an initial lump-sum investment into a guaranteed monthly payment that continues until you die, creating “an income stream that you can’t outlive,” Glowacki says. An in-plan annuity allows you to convert some or all of your 401(k) into steady income, taking the guesswork out of timing withdrawals.

“Retirement accounts were not designed for withdrawals,” says Hodgens. “If you are contributing to an annuity within your 401(k), when you are ready to retire, you receive a monthly income for the rest of your life based on what this annuity has grown to and accumulated.”

How much you choose to convert depends on the type of in-plan annuity you purchase. For example, if you turn your 401(k) into an immediate annuity — one that begins making payments within a short period — you could convert all your savings into monthly payments, Fox says.

Alternatively, you could opt for a qualified longevity annuity contract (QLAC), which, under SECURE 2.0, caps the annuitized portion of your 401(k) at $210,000. For example, if you have $600,000 in retirement savings, you could turn $210,000 into monthly income while the remaining $390,000 continues to grow.

“The sweet spot for many employees is the need for both longevity protection as well as making sure there is liquidity to cover financial shocks,” says Chantel Sheaks, vice president of retirement policy for the U.S. Chamber of Commerce. “That’s why people are now thinking outside the box and creating new products.”

Are employers ready?

How far and how fast those new products spread depends on employers’ willingness to include them in their benefit packages.

According to LIMRA research, only 14 percent of defined contribution plans currently offer an annuity option, but more than 40 percent of plan sponsors say they intend to add one or are actively considering it.

“I think employers are looking at this,” Sheaks says. “However, in the past few years, there have been many legislative changes that employers need to implement, and they have not had time to reevaluate their plans.” For example, SECURE 2.0 now requires most newly established workplace retirement plans to automatically enroll employees and annually increase contribution rates.

“Hopefully, once such changes are fully implemented, it will give employers time to look at other plan designs,” Sheaks says.

Fox says in-plan annuities can benefit employers as well as employees. “If you have certainty around income streams in retirement, for example, it can lead to easier workforce management and retention.”

It may just take a little more time for these new plan options to become mainstream, he adds.

“Offering lifetime income within the context of an employer-sponsored 401(k) or other retirement account is not commonplace yet,” Fox says. “But it is very possible for this to become standard practice. As more employers adopt solutions, it becomes easier for others to follow suit.”

Is an In-Plan Annuity Right for You?

While financial planners generally advise against putting all your retirement savings into an annuity, converting part of your 401(k) account into guaranteed monthly payments can provide steady cash flow while other investments continue to grow. Whether an in-plan annuity is right for you — and how much to put into one — depends on your own personal and financial circumstances. Here are some factors to consider.

Your savings history. If you have a smaller nest egg, an annuity can help stretch those savings, says Evan Potash, an executive wealth management adviser for TIAA. He cites a family example — a relative of his was on track to drain their savings within 10 years. “We converted some of their retirement dollars to a lifetime annuity,” he says. “They’re going to get that in addition to Social Security for the rest of their lives.”
Your health. A major selling point for annuities is that they will keep you from running out of money even if you live to age 100 or more. That’s less enticing if you have a medical issue that’s likely to shorten your lifespan. “If a client tells me they have a current major health concern, then they would probably not be the best candidate for a lifetime annuity,” Potash says.
Your age. Someone 20 years from retirement may choose to keep most of their savings invested in stocks to pursue high returns. “The younger consumer might say, ‘I want to be more aggressive so I’m not going to allocate as much money to an annuity,’ ” says Hodgens. But as retirement nears, an annuity can help you protect the money you already have, he says.
Your appetite for risk. With any investment, there’s a chance you’ll lose money. If market volatility or fears of a crash are keeping you up at night, having some of your money in an annuity could provide peace of mind — you can use it to cover basic expenses no matter what the market does.
Your beneficiaries. If you’re saving just for you — as opposed to, say, building an inheritance for a spouse, kids or favorite charity — you might be fine with putting more money into an annuity to maximize your income security while you’re still around. Some annuities can be structured to account for posthumous plans; for example, you can lock in payouts for a set number of years, so your beneficiaries will keep getting them if you die before the term ends. Just know that annuities with longer guarantee periods won’t pay out as much per month, Potash says.

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Maya Dollarhide is a freelance writer whose work has been published by MarketWatch, Yahoo Finance, Investopedia and other national publications.

Tamara E. Holmes is a Washington-based writer and editor. She has written extensively about money, entrepreneurship and careers for more than two decades. Her work has appeared in such publications as USA Today, Working Mother and Essence.

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