In-plan guaranteed lifetime income: Digging deeper into participant demand

This blog examines results from the 2Q 2024 Quarterly Market Perceptions Study from Allianz Life Insurance Company of North America (Allianz). The study provides valuable insights into participant demand for in-plan guaranteed lifetime income solutions, such as annuities, highlighting key differences among generations and demographic groups.


Digging deeper into participant demand

Americans are facing a complex retirement landscape with a number of unforeseen risks. While many think of retirement as a time of rest and relaxation, the reality is that 66% of participants expect most of their retirement income to come from their employer-sponsored plan, and a staggering 61% worry they’ll run out of money. This financial anxiety is particularly acute for those with fewer investible assets, highlighting the need for strategies aimed at promoting retirement security.

This is where in-plan guaranteed lifetime income (GLI) solutions come in. These are products, available within a defined contribution (DC) plan, that allow participants to convert a portion of their savings into a guaranteed stream of income payments they’ll receive throughout retirement.

78% of participants say that having an option that allows them to build a protected foundation for lifetime income would demonstrate that their employer has a vested interest in their retirement readiness and well-being. 74% of participants say that having an option that allows them to build a protected foundation for lifetime income would increase their loyalty to their employer.

Demand is high, but language matters

While interest in in-plan annuities has dipped slightly year over year (64% in 2024 wanting more information about in-plan annuities compared to 68% in 2023), the concept of guaranteed lifetime income and the protections these products provide resonates strongly.

Whereas 59% of participants said they would consider adding an annuity to their employer-sponsored plan, three-quarters of participants (75%) said they would consider adding an option that offers guaranteed lifetime income to their employer-sponsored plan. Further, 73% wish they had more options in their plan that protected their money from market downturns.

Additionally, when being described in terms of augmenting Social Security, there was slightly stronger interest. Nearly 8 in 10 (78%) participants said they would be interested in a product that can serve as a supplemental source of guaranteed lifetime income in addition to Social Security. By describing these products in terms of the benefits and features they provide, and using familiar terms, we can help deepen understanding about these products and the value they can bring to a portfolio.

Participants seek individualized support

When considering the addition of an annuity to their employer-sponsored plan, the vast majority of participants (92%) place high importance on having their personal circumstances and goals taken into account beyond their target retirement age. They are looking for help in determining how much of their funds should be allocated toward an annuity, recognizing that it is a personal decision and that different participants have different income needs.

Personalized advice and guidance are also of great interest to participants, with 68% considering enrolling in an advice program to access a guaranteed lifetime income product within their plan. Moreover, 73% of those who would consider adding an annuity to their plan are willing to pay an additional fee for an advice program to ensure they are maximizing their benefits. It is clear that participants value individualized support to help them make informed decisions about their retirement savings.

Flexibility, accessibility, portability, and growth potential top participant priorities

In addition to personalized advice, participants seek specific features in an in-plan annuity, including flexibility in income options, the ability to take withdrawals after starting income, seamless IRA rollover capabilities, and growth potential to address inflation.

Of those who would consider allocating to an annuity as part of their employer-sponsored plan:

  • 92% prioritize flexibility in choosing when and how to take income from their annuity plans
  • 88% value the option to take additional withdrawals after starting income to accommodate changes to their circumstances in retirement
  • 88% also say it’s important to be able to transfer/roll over an annuity from their employer-sponsored plan into an IRA without any changes to benefits, guarantees, or pricing
  • 90% say it’s important for the annuity to have growth potential to address the impacts of inflation

Flexibility, accessibility, portability, and growth potential are top priorities for participants considering an annuity as part of their employer-sponsored plan. These features, along with the guaranteed lifetime income provided by these products, can help individuals financially prepare for retirement and address the dynamic circumstances that may arise during this stage of life. When complemented with personalized advice, participants can feel more confident in their plan and their ability to make informed decisions about their retirement savings.

Generational differences when considering in-plan annuities

Generational differences also play a role in how participants perceive annuities as an option within their employer-sponsored plans. While interest in adding an annuity remains steady among Gen Xers (68%) and millennials (67%), there was a slight dip among baby boomers from 55% in 2023 to 43% in 2024. Gen X is the most concerned about running out of money in retirement, with 73% feeling stressed about this possibility, compared to 65% of millennials and 45% of baby boomers.

Millennials and Gen Xers value the option to build a protected foundation for lifetime income, with 87% and 77%, respectively, believing that such an option demonstrates their employer's vested interest in their retirement readiness. Moreover, these generations are also most interested in personalization and advice, with 76% and 74%, respectively, willing to pay extra for an advice program. This suggests that these generations are more proactive in seeking out information and guidance to help them make informed decisions about their retirement savings.

All generations value accessibility, flexibility, portability, and growth potential when considering an annuity in their employer-sponsored plan. However, accessibility and flexibility are particularly crucial for Gen X, with 94% prioritizing additional withdrawals and 96% prioritizing flexibility in choosing when and how to take income from the annuity. These features reflect Gen X's concerns about running out of money in retirement and the need for options that can address the dynamic circumstances that may arise during this stage of life.

Demographic differences in awareness and interest in in-plan annuities

The study found that certain demographic groups in the United States show a stronger interest in annuities as part of their employer-sponsored retirement plans. Specifically, 77% of Hispanic participants and 74% of Black/African American participants expressed a desire to learn more about annuities, compared to 68% of Asian/Asian American participants and 62% of white participants. However, when the term "guaranteed lifetime income" was used instead of "annuities," interest in these solutions increased across all groups. Consideration rose from 59% to 74% among white participants, from 62% to 81% among Black/African American participants, from 71% to 78% among Hispanic participants, and from 66% to 81% among Asian/Asian American participants.

The study also found that Hispanic (82%), Asian/Asian American (79%), and Black/African American (81%) participants were more likely to wish there were more options in their retirement plans that protected their money from market downturns, compared to 71% of white participants. Black/African American participants were most aware that annuities could be available as an option within their DC plan, with 80% indicating awareness (compared to 60% of white participants, 70% of Hispanic participants, and 71% of Asian/Asian American participants).

Regarding personalization and advice, Black/African American (86%), Hispanic (80%), and Asian/Asian American (80%) participants were more willing to pay an additional fee for an advice program that would help them maximize their benefits if they had access to an annuity as part of their employer-sponsored retirement plan. While the ability to take withdrawals was important to all groups, it was particularly important to Black/African American participants, with 93% indicating the importance of being able to take additional withdrawals after starting income in retirement.

Finally, while personalization was important to all groups, Asian/Asian American participants were most interested in it, with 95% indicating that it was important for their retirement plan to consider their personal circumstances and goals beyond retirement age to help them determine how much they should allocate to the annuity.

Next steps

While it's encouraging to see strong participant interest in solutions like in-plan guaranteed lifetime income, it's important to note that this interest doesn't always translate to immediate demand. There are behavioral barriers and other obstacles that can prevent participants from actively advocating for these solutions. However, it's worth noting that when these solutions are explained in familiar terms and feature attractive benefits, participants are interested in learning more.

To fully understand the spectrum of products available and how they can improve participant outcomes, it's essential to be educated on these types of solutions. Visit www.allianzlife.com/dcplanresearch to learn more about this topic and access our latest insights.

Employer Markets Engagement & Education Blog Series

By: Meghan Farrell

Meghan Farrell is a Marketing Manager for the Employer Markets channel at Allianz Life Insurance Company of North America. With a diverse range of experience developing impactful communications, Meghan now leads thought leadership efforts for the Employer Markets channel at Allianz Life. Her passion lies in helping more Americans enjoy a dignified retirement through actionable research and accessible communications.

Allianz Life conducted an online survey, the 2024 2Q Quarterly Market Perceptions Study, in May 2024 with a nationally representative sample of 1,005 individuals age 18+. The study included an oversample of respondents who identified as Black/African American (277 responses); Hispanic (265 responses); Asian/Asian American (265 responses).

Fixed index annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of principal and credited interest, tax-deferred accumulation potential, and the reassurance of a death benefit for beneficiaries.

Purchasing an annuity within a retirement plan that provides tax deferral under sections of the Internal Revenue Code results in no additional tax benefit. An annuity should be used to fund a qualified plan based upon the annuity’s features other than tax deferral. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan.

Allianz Life Insurance Company of North America does not provide financial planning services.

Guarantees are backed solely by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America.

Annuities are issued by Allianz Life Insurance Company of North America.

Product and feature availability may vary by state and retirement plan.

• Not FDIC insured • May lose value • No bank or credit union guarantee • Not a deposit • Not insured by any federal government agency or NCUA/NCUSIF

This content does not apply in the state of New York.