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Is a New Age on the Horizon for 401(k) Participants?

As BlackRock launches its target-date series with annuities, we look back at the history of retirement-income solutions.

Illustration of eggs stacked in a nest, with a person holding one egg and looking at the stack

Retirement is supposed to be about spending time with grandchildren, traveling, and winning the local pickleball league, not worrying about running out of money. But one of the most challenging parts of retiring is the transition from living off paychecks to paying yourself.

That seismic shift means the average retiree faces numerous unknowns, a slew of psychological obstacles to maneuver, and, on top of all that, math. And, as current savings and spending patterns show, retirees need help making these monumental decisions.

The number of retirees who need help navigating their income is also set to skyrocket over the next several years. One estimate from the Alliance for Lifetime Income, a nonprofit educational organization, suggests that more than 4 million people in the US will hit the retirement age of 65 every year through 2027.

BlackRock’s Larry Fink is optimistic that the firm’s newly launched BlackRock LifePath Paycheck target-date series, which includes an annuity as part of the glide path, can be the solution retirees are looking for.

Below, we explore how we got here with a brief, and imperfect, history of retirement-income solutions.

Time Immemorial: Do-It-Yourself

No rule says you have to get help when developing a retirement-income strategy. But just like there’s no rule that says you can’t have ice cream for every meal, there may be some discomfort associated with going solo. (Astute readers will note the risk of outliving your retirement savings is a relatively new problem.)

1700s BCE: Annuities

In exchange for a lump sum of money, an annuity contract guarantees you regular income until you die (provided the other side of the contract doesn’t go bankrupt first). These types of contracts have been around since Ancient Egypt, but they didn’t become popular in the US until the 1930s when the Great Depression drove people to look for some insurance against running out of money. Since then, the types of annuities have multiplied—and so has their complexity.

1870s CE: Pensions

Pensions, or defined-benefit plans, gave workers the peace of mind that they would have a regular income stream in retirement provided by their employers.

It’s a great deal for workers, but for companies, it’s much easier to transfer that responsibility to the individual. Pensions have been gradually disappearing and being replaced by defined-contribution plans, where the amount to save and where to invest are left to the individual.

1930s: Social Security

Social Security remains a valuable source of retirement income, especially if you have the wherewithal to delay your benefits until age 70. But for most people, Social Security will only replace a percentage of their salary in retirement, so they still need some supplemental savings to cover the rest, plus other goals like leaving money behind for heirs.

1980s: Defined-Contribution Plans

Defined-contribution plans were born out of corporations’ desire to no longer provide pension benefits. Although they don’t offer the same guarantees as a pension plan, defined-contribution plan features, like auto-enrollment and auto-escalation, help investors along the way to retirement. For many, their investments in these plans are their entire retirement savings.

2000s: Target-Date Strategies

Target-date strategies aren’t specifically designed to deliver income in retirement, but they are the most popular default investment option in defined-contribution plans. These strategies offer a hands-off solution for investors that automatically allocates contributions to a diversified portfolio of stocks and bonds. The allocation is aggressive but gradually becomes more conservative as it nears the retirement date, and some continue to lower the percentage of equities for longer.

2020s: Target Dates With Annuities?

The passage of the Secure Act in 2019 reduced the fiduciary liabilities for a defined-contribution plan sponsor that offers annuities for its participants. This opened the door to the dozen or so target-date series with an annuity component that have launched since.

Although these strategies show promise, it’s still too early to tell if they truly offer an evolution for retirement income or are as fleeting as the benefits of eating ice cream for every meal.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Authors

Jason Kephart

Director, Multi-Asset Ratings
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Jason Kephart, CFA, is director of multi-asset ratings for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is responsible for Morningstar’s multi-asset ratings methodology and shares responsibility for research priorities. Kephart leads the firm’s global and North American multi-asset ratings committees. Kephart regularly contributes to Morningstar’s thought leadership on target-date strategies, 60/40 portfolios, model portfolios, and other multi-asset outcome-based products. He has been the lead analyst for multi-asset strategies from firms such as Vanguard, BlackRock, T. Rowe Price, and Dodge & Cox.

Before joining Morningstar in 2014, Kephart spent seven years as a journalist for InvestmentNews, Fund Action, and SmartMoney, reporting primarily on the mutual fund and exchange-traded fund industries.

Kephart holds a bachelor’s degree in English from Florida State University. He also holds the Chartered Financial Analyst® designation.

Samantha Lamas

Senior Behavioral Researcher
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Samantha Lamas is a behavioral researcher at Morningstar. She is a recipient of the Montgomery-Warschauer Award for her research in financial planning.

Lamas' research focuses on investor engagement and the factors that drive people's decision-making about investing and money. Her work delves into how people think about their financial goals, what they look for when seeking financial advice, and what kinds of mental shortcuts people use when making decisions about their personal finances.

Lamas joined Morningstar in 2016 as a product consultant working directly with the individual investor and advisor audience segments before moving into a research role.

Lamas holds a bachelor's degree in business with a concentration in finance from Dominican University. Follow Lamas on Twitter at @SamanthaLamas4 and on LinkedIn.

Email Samantha at

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