Surging Interest in Annuity-Integrated Target-Date Strategies
Interest in annuity-integrated target-date strategies is surging, with asset managers, regulatory authorities, and plan sponsors focusing on incorporating guaranteed income options into retirement plans. According to Morningstar's recent research, the value of multi-asset portfolios that include in-plan annuities has surpassed $115 billion, marking a 150% increase over the past two years. Managed accounts within 403(b) plans hold about half of these assets, but momentum is notable within 401(k) target-date strategies, which have risen to $42 billion as of March, up from $25 billion the previous year.
Driving much of this growth is BlackRock’s LifePath Paycheck, a retirement income solution introduced in 2024, which has amassed over $25 billion in assets. This innovative offering allows participants to acquire lifetime income through annuities accessible at age 59½.
The surge in focus can also be attributed to a newly proposed rule by the Department of Labor (DOL), aimed at expanding alternative investments in defined contribution plans. While lifetime income products are not explicitly mentioned, the proposal's safe harbor provisions could encourage broader product adoption. Jason Kephart, Morningstar’s Senior Principal and Manager of Research, notes that this regulatory guidance may lessen fiduciary liability concerns and boost sponsor confidence in considering alternatives to traditional target-date funds.
Regulatory Developments and Safe Harbors
The proposed DOL regulation introduces procedural safe harbors to assist fiduciaries in evaluating designated investment alternatives, thereby reducing litigation risk for employers. These criteria encompass factors such as fees, complexity, performance, benchmarking, liquidity, and valuation.
Morningstar advises plan sponsors to assess additional aspects when considering annuity products, including the insurer's financial stability backing the annuity and the target-date manager's methodology in selecting and monitoring the insurer. Kephart emphasizes the importance of a robust selection process and high investment-grade ratings from credible agencies to ensure the reliability of the guaranteed income institution.
Market Expansion and New Entrants
The research also highlights Vanguard's entry into the lifetime income market, which has increased awareness of these products. In December 2025, Vanguard and TIAA announced their collaboration to offer a target-date collective investment trust with an integrated annuity, specifically available to 401(k) plans.
Morningstar estimates that the involvement of major firms like JPMorgan and Principal in the annuity market will further drive expansion in the coming years, indicating a promising future for annuity-integrated retirement strategies.