Turning the lifetime income conversation into action

The momentum around lifetime income solutions inside defined contribution (DC) plans continues to grow. New products continue to launch, new recordkeepers are adding lifetime income products, and the conversation among plan sponsors, consultants and participants is shifting in real ways. But as three leading advisors see it, the hard work is only just beginning. We spoke with Matt Hedley and Vin Smith of Fiducient a Wealthspire Company, and Vern Cushenbery of Two West Advisors about where the lifetime income landscape stands today, what’s driving adoption, and what advisors need to do to help close the gap between what’s available and what participants actually experience.

The product range has grown. Now comes the real work

Income solutions are now embedded in target date funds, offered as stand-alone in-plan annuities, and structured as hybrids designed to balance guarantees with liquidity. That breadth is encouraging, but some characteristics remain a sticking point for getting these products into plans. “Over the last several years we’ve seen meaningful innovation around lifetime income solutions inside defined contribution plans,” Vern says. “Today’s marketplace is much broader than it was even five years ago. However, the reality is that simply adding more products won’t move the needle. The real impact will only come when lifetime income can be implemented on autopilot within a QDIA (Qualified Default Investment Alternative) much like autoenrollment and autoescalation helped solve the savings problem.”

Matt points to education as the immediate priority. “It’s exciting to see the trends and the momentum increasing over the past few years. There are new strategies, new solutions that are coming to the market, and now we are determining how to position them properly. I think the education gap is really the next step, whether that is for the plan sponsor or participants.”

Vin agrees, and adds that the terminology itself is creating friction. “If I think about our client base and the evolution of the product set, there is a lot of headline noise. This isn’t helped by these products being set up in a different language with different naming conventions. So, despite significant progress, I do think there’s a pretty steep learning curve that still exists for the plan sponsor community.”

Retirement income is a strategy, not a product

One of the most consistent refrains is the importance of messaging the coming products with lifetime income to participants, as this helps them relate and understand what could be a complex decision. “I think retirement income is getting painted as a product, when really it’s a strategy,” Matt says. “When we are educating the participant or the investor, it’s coming from a planning perspective. If we talk about saving or investing for the future, rarely do we just jump to talking about an ETF or a mutual fund. But the real conversation is within the planning, the cash flow, the budgeting.”

Key takeaways

1. The retirement income product landscape has expanded rapidly, but education, for plan sponsors and participants alike, remains the critical next step.
2. Advisors need to reframe retirement income as a planning strategy, not simply a product category, to drive meaningful adoption.
3. Evaluating lifetime income products through the right lens helps sponsors and participants feel more comfortable with the emerging products.

Vern sees the same principle through a fiduciary lens, adding, “I also think it’s important not to frame retirement income as a single-product solution. Sustainable income in retirement is usually the result of multiple coordinated decisions, namely investment strategy, withdrawal planning, Social Security timing, and potentially guaranteed income. Lifetime income solutions should be viewed as a tool in the retirement toolbox, not the toolbox itself.”

Vin sees this shift already taking hold at the plan level. “A good number of our clients now think of retirement income as a tier of investments. You have target dates, you have active, you have passive; many of them are now building in an extended tier that includes retirement income. Most are convinced retirement income is necessary. And now employers are going to start to dig through all the different products.”

That distinction between investments shapes how advisors can approach participant communication as well. “With participants, the message has to be much simpler,” Vern explains. “Most people don’t think in terms of assets, they think in terms of income. So instead of asking, ‘How much have you saved?’ the better question is, ‘What level of monthly income could this produce in retirement?’ When participants can visualize their savings as income, lifetime income solutions become easier to understand.”

The analytics of lifetime income products

For all the excitement around product innovation and behavioral design, Vern is careful to ground the conversation around lifetime income. “When we evaluate lifetime income solutions, we approach them through a fiduciary lens similar to how we evaluate any investment or service. The question isn’t simply whether a product offers a guarantee, but whether it meaningfully improves the probability that participants can generate sustainable retirement income.”

Matt sees the conversation similarly, adding, “We are institutional consultants first and foremost, so we do have to look at these strategies and products through the lens of how a committee views it. And oftentimes these types of solutions serve as the default, so we need a vehicle that is going to help folks accumulate as much savings as possible. And if you offer that in an institutional environment it generally will work — but you need to have a focus on saving first and income second.”

Cost, transparency, flexibility and portability all factor into the evaluation of lifetime income products, and the strength of the underlying insurance provider is a fresh aspect to the analysis. “Because these guarantees extend decades into the future, the financial strength of the insurance provider matters,” Vern says. “At the same time, if participants can’t understand how the product works or how it fits into their retirement strategy, adoption will always be limited.”

The cultural moment has arrived

Vin highlights how the participant experience itself has evolved in ways that meaningfully change the calculus. “One of the newer developments that has created some interest is the participant and plan sponsor experience. If you think about the newer products and the way the technology platform is built around the income alternative, this means that a participant can get real-time quotes, understand what the annuity looks like, look at that relative to other options via the plan. That visibility may increase the likelihood of a participant annuitizing.”

He also sees real behavioral value in how liquidity is structured within the product design itself. “I’m a buyer on the notion that if a participant owns a bucket of traditional assets that is liquid and does not have to be annuitized, the likelihood of them turning that into income is higher versus moving money from some other investment structure into an annuity as a one-time lump sum.”

Matt’s approach is focused on how to frame this within structures and conversations that already exist, saying, “financial planning is nothing new, retirement income planning is nothing new, but of all the factors that we’ve brought up, we’re coming to a point where it’s now more out in front. With our busy lives and aging demographic, this is now becoming more important.”

Vern puts liquidity at the center of the behavioral equation. “The real breakthrough will come when lifetime income can be implemented on autopilot inside a QDIA without sacrificing liquidity. Participants simply won’t accept surprises around access to their money.” Until the industry solves for that concern, he believes, adoption will remain gradual. And persistent cultural barriers remain, particularly around the word annuity. Vin adds, “it feels like annuities were popular, then they were not so popular, and we need this generational shift in mindset to get back to a place where income is valued and important. Everybody wants retirement income, nobody wants an annuity.” The challenge, as he sees it, is helping people understand that institutional structures are fundamentally different from the retail products that shaped negative perceptions. “Historically, many folks have thought of annuities in a retail mindset versus the institutional offerings that can solve for the need for income in a much more efficient, economical way.”

The industry has made remarkable progress. The products are better, the technology is more intuitive, and appetite among plan sponsors and participants is growing. What comes next is the sustained effort to educate, reframe and make lifetime income the natural outcome of a well-run retirement plan.

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