Participant perspectives: the shared responsibility of retirement security
Key takeaways:
- 401(k) participants believe retirement income security is a shared responsibility between employees and employers.
- Plan sponsors must consider many factors in the pursuit of a retirement income solution that aligns with their organization’s goals and the needs of participants.
- It’s important that participants understand and are confident about their retirement income options.
The 401(k) plan has become the dominant form of retirement savings for American workers, with over $6.8 trillion in assets and 79 million participants.2 However, most 401(k) plans lack a means for participants to convert their savings to income like that provided by traditional pensions, which have become rare in the private sector. This has created a gap between saving for retirement and receiving income in retirement. A recent Nuveen and TIAA Institute survey showed participants are eager for a way to close this gap.
93% of respondents think it is important for 401(k) plans to provide a way to turn savings into fixed monthly payments that are guaranteed to last for life.
The survey of over 2,100 401(k) participants found significant interest in retirement income solutions and, specifically, for in-plan annuities that can help participants save while they are working as well as provide income during retirement. Participant perspectives from the survey are providing valuable insights — and food for thought — to 401(k) plan sponsors considering retirement income options as an innovation to provide participants with the option to receive secure retirement income.1
Here, we share three key insights from the survey, and implications for plan sponsors.
Insight 1:
Retirement security is a shared responsibility
Employees are seeking income in retirement and are looking to their employers to make it available. When asked if employers have a responsibility to help workers achieve an adequate and secure income throughout retirement, 87% of respondents agreed (44% strongly agree). And 93% think it is important (43% very important) for 401(k) plans to provide a way to turn savings into fixed monthly payments that are guaranteed to last for life.1
What does this mean for 401(k) plan sponsors? They should continue to innovate their plans to help workers achieve a more secure retirement. Doing so will not only help better prepare plan participants for retirement, but it will also signal to participants that they are responsive to workers’ needs and preferences.
The organization can benefit from adding retirement income, too. Companies that offer robust employee benefits packages, including innovative retirement plans, can gain a competitive advantage in the pursuit of top talent. We explored this trend in 2024 with Economist Impact as part of the Benefits 2.0 research program.3
In addition, firms with forward-thinking 401(k) plans may also see benefits in employee recruitment and retention, and, if it is a goal of the plan, better retain participants’ assets in the plan through employee loyalty fostered by improved financial wellness.
Insight 2:
Success lies in the execution
401(k) participants are strong proponents of in-plan annuities. First, 92% would be interested in using an in-plan fixed annuity, if included in their plan, to provide guaranteed income during retirement, with 49% very interested. Likewise, 92% said they’d be interested (48% very interested) in using an in-plan fixed annuity to save for retirement.
Plan sponsors should take into account these high levels of participant interest as they think about in-plan annuities as a retirement income solution. There are certainly other factors to consider as well, and the importance of properly integrating them underscores the need for a sound, well-conceived approach.
When contemplating the variables involved with retirement income, the plan sponsor should ensure their approach aligns with its fiduciary duties, fits the organization’s strategic goals, and meets the needs of participants. By taking a step back to answer important questions, plan sponsors can work toward a successful integration of retirement income into their plans. Answering these and other questions can be daunting, but a good advisor or retirement consultant can help work through any obstacles.
- What are the firm’s strategic goals for offering retirement income?
- Are there operational or technical hurdles to overcome?
- What does the recordkeeper offer?
- Which of the various retirement income options are right for the plan?
- What is the right fee structure?
- Does the plan have the mechanisms to make partial distributions?
- Who are the right partners for plan design, income investment options, product evaluation, insurance/underwriting, etc.?
- How do plan participants’ demographics impact the approach?
- How much participant education is needed? On what topics? Who will provide it?
- What are the legal risks or other complications?
- How is success measured?
Insight 3:
Turning ambiguity into clarity
In the absence of in-plan retirement income options, many 401(k) participants lack clarity and understanding about withdrawing money in retirement. In fact, only 32% of participants said they have a very good understanding of the ways they can make withdrawals from their 401(k) savings, and only 26% are very confident about choosing the best way to do so. In fact, only 21% have given the subject a lot of thought.
Meanwhile, only 33% of 401(k) participants have received retirement advice in the past two years about using retirement savings to provide retirement income.
These findings highlight the critical need — and opportunity — for participant education and advice. Given the level of interest in retirement income, it seems likely that participants would be receptive to this information.
The lesson for plan sponsors? Despite participant interest in retirement income, their current understanding and confidence in this regard is limited. And plan sponsors should also not assume that participants are giving this as much thought as they should.
As plan sponsors explore or implement retirement income solutions, they may begin tailoring their participant communications to ensure a foundation of understanding from the outset. They should also consider educational programming that focuses on answering participant questions like: How much of my retirement savings can I spend each year? What is the best strategy for withdrawing money to fund my spending in retirement?
32% of participants said they have a very good understanding of how to withdraw from their 401(k) savings.
The potential for target-date funds5
Among 401(k) participants who are invested in a target date fund (TDF), 95% think including a fixed annuity component in such investments would be valuable (47% very valuable). This is a critical finding given the prevalence of target date investments in 401(k) plans and their use as plan defaults.
Participants generally understand these funds’ glidepath approach, so embedding an annuity in a TDF would likely be an easier-to-understand — and desirable — new option.
Meanwhile, enhancing an existing TDF lineup with an option that includes an embedded annuity can be a relatively straightforward process for plan sponsors. Plan sponsors can also consider offering a TDF with an embedded annuity as a QDIA, which would provide participants with an all-in-one, set-it-and-forget-it solution.
The way forward
Findings from the survey can educate and inform plan sponsors wherever they are on their plan’s retirement income journey. But one thing is clear: 401(k) participants would like a way within their plans to convert retirement savings into fixed monthly payments guaranteed to continue throughout their lifetimes. In particular, they are proponents of in-plan fixed annuities.
Insights like these are just the beginning. We believe interested 401(k) plan sponsors can take several near-term steps:
- Review their plans to explore a potential fit for retirement income options
- Illustrate to leadership how retirement income can benefit the company through employee loyalty, retention and attraction of top talent
- Adapt participant communications, shifting some of the emphasis from saving for retirement to providing income in retirement
- Engage with advisors or consultants to understand the types of retirement income offerings and how they may fit into their 401(k) plans
- Partner with a provider to learn more about lifetime income
About the survey
The survey questionnaire was developed by the TIAA Institute in consultation with Nuveen and was fielded by Greenwald Research. More than 2,100 401(k) participants were surveyed online between October 23 and November 29, 2024.
For more information and to see the full results of the survey, go to https://www.nuveen.com/global/insights/retirement/participantperspectives
Continue reading
Where do private markets fit into a DC plan?
Exploring private market investments for today’s 401(k)s
Explore now
Dive deep into communication strategies that help participants stay invested long-term.
Practicing effective plan management through volatile times
Explore now
Leading DC consultants explore the process of implementing and measuring lifetime income solutions.
The nuts and bolts of implementing lifetime income
Explore now
Endnotes
¹ Any guarantees are backed by the claims-paying ability of the issuing company. Past performance is no guarantee of future results. Guarantees of fixed monthly payments are only associated with fixed annuities.
² Sources: Employee Benefits Security Administration (EBSA), 2024, Private pension plan bulletin: Abstract of 2022 Form 5500 annual reports, U.S. Department of Labor.
³ Read more about Benefits 2.0 here: https://www.nuveen.com/global/campaigns/benefits-2- 0?type=us#view-benefits
⁴ Pension-like income refers to the income received from guaranteed-interest annuity contracts, not income provided by a defined benefit pension plan.
⁵ A target-date fund is a “fund of funds,” primarily invested in shares of other mutual funds. The fund’s investments are adjusted from more aggressive to more conservative over time as the target retirement date approaches. The principal value of a target-date fund isn’t guaranteed at any time, including at the target-date, and will fluctuate with market changes. The target date represents an approximate date when investors may plan to begin withdrawing from the fund. However, you are not required to withdraw the funds at that target date. After the target date has been reached, some of your money may be merged into a fund with more stable asset allocation. Also, please note that the target-date fund is selected for you based on your projected retirement date (assuming a retirement age of 65). Target-date funds share the risks associated with the types of securities held by each of the underlying funds in which they invest. In addition to the fees and expenses associated with the target-date funds, there is exposure to the fees and expenses associated with the underlying mutual funds as well.
⁶ The Nuveen Lifecycle Target Date Series (formerly the TIAA-CREF Lifecycle Fund Series) first included direct real estate investments in 2017. See the press release titled: “Nuveen enhances target-date fund offering with direct real estate allocation,” April 20, 2017.
⁷ Top 5 real estate manager globally based on Pensions & Investments Real Estate Managers Special Report, October 2024. Ranking included 72 real estate managers and ranked them by total worldwide real estate assets as of 30 Jun 2024. Real estate assets are reported net of leverage, including contributions committed or received but not yet invested; REOCs are included with equity; REIT securities are excluded.
⁸ PlanSponsor. 04 Apr 2025. Center for Retirement Research at Boston College. Nov 2012.
⁹ FactSet, 31 Dec 2024.
¹⁰ Dollar cost averaging does not assure a profit and does not protect against loss in declining markets.
¹¹ Nuveen and TIAA Institute Participant Sentiment Survey on Lifetime Income, 2024
¹² Opinions expressed are those of the speakers as of the date and are subject to change without notice and do not necessarily reflect Mercer’s opinions.
Before investing, carefully consider fund investment objectives, risks, charges and expenses. For this and other information that should be read carefully, please request a prospectus or summary prospectus from your financial professional or Nuveen at 800.257.8787 or visit nuveen.com.
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or investment strategy and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with their financial advisors. Financial professionals should independently evaluate the risks associated with products or services and exercise independent judgment with respect to their clients. This material, along with any views and opinions expressed within, are presented for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as changing market, economic, political, or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. There is no promise, representation, or warranty (express or implied) as to the past, future, or current accuracy, reliability or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such. This material should not be regarded by the recipients as a substitute for the exercise of their own judgment. For index definitions, please visit the glossary on Nuveen.com. Please note it's not possible to invest in an index directly.
Important information on risk
Past performance is no guarantee of future results. All investments carry a certain degree of risk, including the possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Certain products and services may not be available to all entities or persons. There is no guarantee that investment objectives will be achieved. See the applicable product literature for details. Investors should be aware that alternative investments are speculative, subject to substantial risks including the risks associated with limited liquidity, the potential use of leverage, potential short sales, currency exchange rates, and concentrated investments and may involve complex tax structures and investment strategies. Alternative investments may be illiquid, there may be no liquid secondary market or ready purchasers for such securities, they may not be required to provide periodic pricing or valuation information to investors, there may be delays in distributing tax information to investors, they are not subject to the same regulatory requirements as other types of pooled investment vehicles, and they may be subject to high fees and expenses, which will reduce profits.
Nuveen, LLC provides investment solutions through its investment specialists.
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA institute.
About Nuveen Lifecycle Income CIT Series
SEI Trust Company serves as the Trustee of the Nuveen/SEI Trust Company Investment Trust III and maintains ultimate fiduciary authority over the management of, and the investments made, in the Nuveen Lifecycle Income CIT Series (Lifecycle Income CIT Series).
Each fund is part of a 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 Lifecycle 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 Income CIT Series.
The Lifecycle 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 a bank collective investment trust, the trust is exempt from registration as an investment company. A plan fiduciary should consider the funds’ objectives, risks, and expenses before investing. This and other information can be found in the Declaration of Trust and the Funds’ Disclosure Memorandum.
Annuity contracts may contain terms for keeping them in force.
