Annuity-Integrated TDFs Reach Momentum
Annuity-embedded target-date strategies are gaining ground, as asset managers, regulatory agencies, and plan sponsors show interest in offering guaranteed income in retirement plans.
Broader multi-asset portfolios with in-plan annuities surpassed $115 billion, an increase of 150% compared to two years ago, finds new research from Morningstar.
While half of these assets are in managed accounts for 403(b) plans, the fund analyst says momentum is increasing for target-date strategies in 401(k) plans. Assets in target-date funds with annuities secured $42 billion as of March, up from $25 billion the year prior.
BlackRock’s retirement income solution, the LifePath Paycheck, has driven most of the growth in adoption. The fund, launched in 2024, has risen to over $25 billion in assets. Under the feature, participants who purchase lifetime income can access the annuities by age 59½.
Morningstar credits some of the attention to the Department of Labor’s recently proposed rule that would expand alternative investments in defined contribution (DC) plans. While the proposal does not explicitly name lifetime income, its safe harbor framework could enable broader adoption of the products, Morningstar projects.
“For plan sponsors, that guidance is a relief; navigating fiduciary liability is a real constraint, and clarity on safe harbors may embolden plan sponsors to look beyond traditional target-dates,” Morningstar’s Senior Principal and Manager of Research Jason Kephart wrote.
The DOL’s proposal establishes a set of process-based safe harbors for plan fiduciaries to use when selecting designated investment alternatives, thereby protecting employers and limiting litigation risk. These considerations include fees, complexity, performance, benchmarking, liquidity, and valuation.
When evaluating an annuity product, Morningstar suggests plan sponsors analyze a couple of other considerations: the financial strength of the underlying insurer, and the target-date manager’s process for selecting and monitoring the insurer.
“A rigorous selection process from the target-date manager, paired with stable investment-grade ratings from third-party agencies, can together provide reasonable assurance that the institution standing behind participants’ guaranteed income is built to last,” Kephart wrote.
The research also touched on Vanguard’s entrance into the lifetime income market and how that presence fueled further awareness in the product. In December 2025, Vanguard and TIAA announced their partnership to offer a target-date collective investment trust (CIT) with a built-in annuity that would only be available through 401(k) plans.
Morningstar estimates that other mega-firms’ entrance in the annuity market, like JPMorgan and Principal, will drive additional expansion in the years ahead.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news.