TIAA survey finds three out of four employers see growing demand for lifetime income in retirement plans over the next five years

But 63% of respondents admit they need help understanding the value and importance of annuities

TIAA and Nuveen lifetime income default target-date offerings surpass $50 billion in AUM on growing demand

NEW YORK, Dec. 11, 2024 /PRNewswire/ -- Five years after the passing of the SECURE Act, making it easier for Americans to save for retirement through annuities, new research from TIAA suggests more employers are primed to offer lifetime income, but adoption of these products may be hindered despite growing interest due to a lack of "annuity fluency."

TIAA's first annual survey of defined contribution (DC) plan sponsors, "Building a Better Retirement 2024" takes a comprehensive look at the attitudes, needs, and goals of C-suite decision-makers across 401(k), 403(b) and 457 plans.

Overall, 76% of DC plan sponsors expect demand for annuities will grow over the next five years, similar to how target-date portfolios took off once policymakers paved the way for them to be the default. More than 40% of plan sponsors that don't already offer an annuity say they plan to do so in the next two years.

"As pension plans began to wane, employers and policymakers were focused on getting people to save through defined contribution plans," said Kourtney Gibson, CEO of TIAA Retirement Solutions. "Now with growing uncertainty around Social Security and people living longer lives, we need to help people manage their savings to last through retirement. Our research indicates that plan sponsors are open to offering lifetime income but need support to add it to their plans—and consultants have a huge role to play in delivering that help."

Eighty-five percent of sponsors say that employees need additional sources of guaranteed lifetime income beyond Social Security, and 59% cite Social Security's uncertain future as the top external factor driving them to add or consider adding annuities to DC plans. They also note increased adoption by other employers (52%) and changing demographics, such as longer lifespans (48%).

What stands in the way: Annuity fluency

The survey found that the adoption of annuities in DC plans may be slowed by a lack of understanding of annuities and how the products work, or "Annuity Fluency." Only 37% of sponsors say they can articulate the value and importance of annuities. Among sponsors planning to offer annuities, the top two barriers are a lack of understanding among decision-makers (39%) and complexity (39%). For those not planning to offer annuities, lack of understanding (43%) is the No. 1 barrier.

On behalf of TIAA, Greenwald Research surveyed 500 C-suite decision-makers across the entire DC landscape. The survey was blind; respondents did not know TIAA sponsored it.

TIAA is the leader in lifetime income whose mission is to provide a more secure retirement to millions more Americans with the assurance of a retirement check that lasts for life.

An essential role for consultants

Most employers (88%) work with an external consultant or financial advisor to assist with fiduciary oversight, investment recommendations, strategy, and other guidance. But they want even more support.

"Plan sponsors told us that, as the lifetime income trend gains momentum, they will be looking for consultants to provide support especially on significant ideas and strategy," said Jason Key, TIAA Retirement Solution's head of consultant relations. "That support can include implementation of annuities in a DC plan—which could have a significant impact on employee retirement security and organizational reputation."

The survey also found that 48% think guaranteed income is a top way to positively impact participants' retirements and 38% are likely to be early adopters of in-plan annuities.

TIAA has a group of professionals solely dedicated to helping consultants deliver support to their plan sponsor clients, with expertise and guidance regarding key DC plan improvements including retirement income.

Demand grows for TIAA and Nuveen lifetime income solutions

As more plan sponsors turn to TIAA for lifetime income solutions assets in TIAA and Nuveen's suite of lifetime income target-date solutions across corporate, educational, governmental, and healthcare retirement plans have grown to $50 billion in AUM from $35 billion in May, far exceeding assets in any other comparable lifetime income products in the market.

These solutions include TIAA RetirePlus, for non-profit institutional clients and The Nuveen Lifecycle Income, an off-the-shelf target-date CIT series for all eligible plan types. These solutions simplify plan administration and allow plan sponsors to deliver lifetime income to their employees in a simple and low-cost manner.

About TIAA

TIAA is a leading provider of secure retirements and outcome-focused investment solutions to millions of people and thousands of institutions. It is the #1 not-for-profit retirement market provider¹, paid more than $5.7 billion in lifetime income to retired clients in 2023 and has $1.4 trillion in assets under management (as of 9/30/2024)².

About Greenwald Research

Greenwald Research is a leading independent research and consulting partner to the health and wealth industries that applies high-quality methods to produce knowledge that helps companies stay competitive and navigate industry change.

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About Nuveen Lifecycle Income CIT Series

The information contained is about the Nuveen target date strategies overall and also contains information about the Nuveen Lifecycle Income Collective Investment Trust Series (Lifecycle Income CIT Series). Please note that the Lifetime Income CIT Series is not a series of mutual funds and differs in many ways from the mutual funds using a similar strategy. Information about the mutual funds or management of the mutual funds should not be automatically applied to the CIT. The Lifetime Income CIT Series may be referred to as "Funds" in the following disclosures.

As a complex bank product, CITs are exposed to operational, regulatory and reputational risks. CITs may not be suitable for all plan investors or all plan needs and may outperform certain sector products during times of market volatility but also may underperform certain sector products over periods of time. Diversification does not assure a profit or protect against loss.

SEI Trust Company (the "Trustee") serves as the Trustee of the Nuveen/SEI Trust Company Investment Trust III (the "Trust") and maintains ultimate fiduciary authority over the management of, and the investments made, in the Lifecycle Income CIT Series. Each Fund is part of the Trust operated by the Trustee. The Trustee is a trust company organized under the laws of the Commonwealth of Pennsylvania and wholly owned subsidiary of SEI Investments Company (SEI). The Lifetime Income CIT Series is managed by the Trustee, based on the investment advice of Nuveen Fund Advisors, LLC, the investment adviser to the Trust, and Nuveen Asset Management, LLC as investment sub-adviser to the Lifecycle CIT Series.

The Lifetime Income CIT Series are trusts for the collective investment of assets of participating tax qualified pension and profit-sharing plans and related trusts, governmental plans and other eligible plans, as more fully described in the Declaration of Trust. As bank collective investment trusts, the Trust is exempt from registration as an investment company.

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1 The target date is the approximate date when investors plan to start withdrawing their money. The principal value of a CIT is not guaranteed at any time, including at the target date. After 30 years past when the target-date has been reached, a CIT may be merged into another target-date CIT with the same asset allocation. The unit value of a CIT will fluctuate, and investors may lose money. A CIT may not achieve its target allocations and even if it does, the asset allocations may not achieve the desired risk-return characteristics and may result in the CIT underperforming other similar funds.

A plan and/or a fiduciary should consider the CIT objectives, risks, and expenses before investing. This and other information can be found in the Disclosure Memorandum. The CIT is not a mutual fund, and its units are not registered under the Securities Act of 1933, as amended, or the applicable securities laws of any state or other jurisdiction.

2 TIAA Secure Income Account is a fixed annuity product issued through this contract by Teachers Insurance and Annuity Association of America (TIAA), 730 Third Avenue, New York, NY, 10017. Form series including but not limited to: TIAA-UQDIA-002-K and related state specific versions.

3 TIAA may provide a TIAA Loyalty BonusSM that is only available when electing lifetime income. The amount of the bonus is discretionary and determined annually.

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All guarantees are based on the claims-paying abilities of the issuing companies.

1. As of June 3, 2024. Based on data in PLANSPONSOR's 2024 DC Recordkeeping Survey, #1 by total 403(b) assets and #1 by 403(b) ERISA plans.
2. As of September 30, 2024, assets under management across Nuveen Investments affiliates and TIAA investment management teams are $1,400 billion.

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