If you crave more predictability when you retire, a trending 401(k) plan option could be the answer to your prayers.
More of America’s largest investment firms are shaking up the standard target-date fund model to offer guaranteed lifetime returns. Traditionally, these 401(k)s simply transferred your growth-oriented stocks into bonds as you approached retirement. With this new breed of 401(k)s, however, you get to add a popular life insurance product to your portfolio: Annuities.
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Fidelity is the latest investment firm to introduce this new way to save with Freedom Lifetime (1). Set for a 2027 debut, this fund starts out as a standard target-date fund, but it gives retirees the option to roll those savings into annuities from New York Life and Nationwide for guaranteed lifetime income.
In a press release about the announcement, Molly Cunningham (1), Fidelity’s head of workplace lifetime financial help, said, “Our priority was to maximize the value of lifetime income while keeping the participant and plan sponsor experience simple and easy to adopt.”
Although Fidelity’s offering is making headlines, it’s actually late to the guaranteed-savings game. Vanguard announced its Target Retirement Lifetime Income Trusts at the end of 2025 (2), and BlackRock has a similar strategy called LifePath Paycheck (3).
Vanguard’s Head of Multi-Asset Product Management Brian Miller highlighted the stability of these new products as their star attribute. As Miller told Moneywise, “Every day, thousands of Americans retire, and many worry about outliving their savings. Vanguard’s Target Retirement Lifetime Income Trusts are a new option for 401(k) plans and participants and can help turn savings into steady income, offering both confidence and predictability alongside traditional sources like Social Security.”
Currently, this 401(k) option isn’t the most accessible, but data suggests it’ll likely become more common among employers. For instance, Callan’s 2025 DC Trends Survey (4) found that 19% of respondents are actively considering fusing their target-date fund model with immediate annuities.
Are annuities the new pensions?
In a way, this push for annuities in 401(k)s may become the 21st-century pension plan.
Although pensions still exist, they’ve become far less prevalent over the past few decades. The Bureau of Labor Statistics’ data now suggests only about 15% of private-sector workers have a traditional defined benefit plan (5).
Even back in 2019, the Employee Benefit Research Institute (EBRI) (6) sounded the alarm on this trend, highlighting a 71% decline in employment-based defined benefit pension plans since 1979.
That major transition from pension plans to 401(k)s shifted a lot of responsibility from employers to employees — and it’s producing a lot of anxiety about spending in retirement.
In fact, a recent Corebridge Financial (7) survey showed it’s more likely for retirees to panic about losing money before they die (56%) than leaving behind too much money (6%). The irony is that this fear of overspending often leads to unnecessary hoarding.
In the eyes of most retirees, a reliable income would soothe all of their fears. The same Corebridge Financial survey found that three out of four respondents agreed a guaranteed lifetime income would “make them happy (7).”
Read More: About 1 in 5 Americans over 50 has zero retirement savings — here’s the catch-up plan you can actually use
Are annuities the ultimate retirement upgrade?
Annuities can’t promise the gains you might get from index funds, but some might say, “so what?” After all, that’s not the point of these products. The true “wealth” here is “peace of mind.”
It’s true that annuities will add predictability to your retirement savings for life, which can help you spend without the fear of running out.
Still, there are tradeoffs to consider. For instance, once you put funds into an annuity, the income usually isn’t adjusted for inflation. So, even though you’re getting the same amount per month, rising prices can erode your purchasing power over time.
Also, the lack of volatility works both ways. While you avoid downturns in the stock market, you also don’t get to take advantage of potentially higher long-term growth.
The good news is that these updated 401(k) plans let you mix-and-match stocks, bonds, and annuities according to your preferences.
If you’re still not sure how to fit annuities into your retirement plan, it could help to ask yourself this simple question: “What portion of your essential expenses do you need guaranteed?” Be sure to factor in your risk preferences and whether you have other sources of income like Social Security and a pension when calculating your “comfort zone.”
Once you know how much you need each month, you should have an easier time figuring out just what to put in these insurance plans and what to leave invested for a stress-free retirement.
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Fidelity (1); Vanguard (2); BlackRock (3); Callan (4); Bureau of Labor Statistics (5); EBRI (6); Corebridge Financial (7)
This article originally appeared on Moneywise.com under the title: Fidelity, Vanguard and BlackRock are all adding annuities to 401(k) plans — betting retirees want pension-like income
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
