A new study examining how retirees manage annuity payouts from defined-contribution plans should make every 401(k) plan sponsor sit up and pay attention. We spend so much time focused on accumulation, deferral rates, employer contributions, fund lineups, that we sometimes forget the entire point of the plan: income in retirement. And income isn’t just about having assets. It’s about making them last.
The research highlights a simple but often overlooked truth: many retirees, particularly women and those with longer life expectancies, may benefit from converting a portion of their savings into guaranteed lifetime income. Others, especially men or participants with shorter life spans, are more hesitant, and for good reason. Traditional annuity pricing doesn’t reflect individual differences in longevity, leaving some participants feeling like they are subsidizing everyone else.
For plan sponsors, the lesson is clear: accumulation-only thinking is outdated. Retirement doesn’t end at the final paycheck, it begins there. And as longevity increases, so does the risk that a retiree outlives their savings. Market volatility, health-care expenses, long-term care needs, all of these pressures turn a lump sum into an unpredictable journey.
This is the moment for sponsors to reevaluate whether their plan design supports retirement income. That doesn’t mean every plan needs an in-plan annuity tomorrow. But it does mean assessing whether participants have access to tools, education, income projections, stable withdrawal options, or yes, optional lifetime-income products, that help them turn savings into security.
Sponsors also need to communicate clearly. Participants often misunderstand how annuities work, what longevity risk means, or how steady income can complement Social Security. A plan that prepares participants for retirement must also prepare them for what comes after.
Because a 401(k) plan isn’t just a place to save money. It’s a bridge to independence. And a responsible fiduciary makes sure that bridge doesn’t collapse halfway across.
