The challenge is no longer just saving for retirement but converting those savings into a reliable paycheck that lasts for life. Yet despite growing awareness of the risk of depleting assets too soon, adoption of guaranteed lifetime income solutions remains low. The three main forces behind this are changing, which presents an opportunity for product innovation.
Rationally speaking, the new benefit offering for Linda – a 55-year-old manager at a tech company – to have a portion of her 401(k) contribution steered toward an annuity should have been greeted as a major opportunity.
Despite scrimping and prudent saving for decades alongside her husband Bob, age 61, Linda dealt daily with financial anxiety about having enough of a nest egg to last her through retirement. So it would make logical sense that the option to convert a portion of their retirement contribution into guaranteed lifetime income at the time of retirement would be met with interest – maybe even relief.
Yet Linda, like so many others, passed on the opportunity – a valuable lifeline against the risk of outliving retirement savings.
The need to integrate lifetime income solutions into 401(k) plans and other retirement savings vehicles has never been more clear. People in the U.S. are living longer, traditional defined benefit (DB) plans are disappearing, and concerns about the future of Social Security are growing.
These shifts have fundamentally changed attitudes about lifetime income and who is responsible for financial security in retirement.
Over the past few years, a growing number of lifetime income solutions have come to market to meet the need. One sign of innovation is the emergence of retirement income solutions embedded directly into workplace plans.
Yet consumer demand remains limited. When participants like Bob and Linda are offered the opportunity to convert their savings into steady income, they generally don’t. Why hasn’t this clear need translated into widespread uptake? The situation is driven by three factors.
This article serves as an overview of in-depth articles RGA will publish in the coming weeks and months exploring each of these factors.
A large portion of today’s retirees still have some sort of pension income. While traditional defined benefit pension plans are disappearing, replaced by today’s 401(k) defined contribution plans, the latest data – from 2024 – shows that about 33% of older adults receive income from a pension.6
That will be less and less true as this decade rolls into the next, as more companies freeze legacy DB plans and offer only DC plans to new employees. Then, a much larger and ever-growing portion of retirees will not have any source of guaranteed income beyond Social Security.
The good news is that access to retirement savings is expanding. In addition, most of today’s retirees have not yet experienced a meaningful reduction in Social Security benefits.
Combined, these factors provide an explanation for inertia: Retirees keep doing what they have always done and what they have seen previous generations do.
But times are changing.
Yes, access to retirement savings is expanding, but that expansion is not automatically converting into lifetime income. Pooled employer plans (PEP) and government-supported IRA programs are essentially variations of existing DC options.
Further, current projections show that, without reform, Social Security benefits could be significantly reduced in the early 2030s. The main retirement trust fund – OASI – is now projected to be depleted in late 2032.7 After that, the system would still provide benefits, but only about 78% of what was scheduled.8 This equals an automatic 22% benefit cut to retirement income if no reform occurs.
When these forces converge, the allure of lifetime income will increase, and insurers that have done the foundational work to develop products to meet the need will be positioned to thrive.
As economist William Sharpe has said, decumulation is the “nastiest, hardest problem in finance.” It is highly personal and even more complex than the accumulation of retirement savings. Whether someone needs lifetime income, how much they need, and when they should start receiving it depends on a range of individual factors. The right answer can vary for each person and is most easily identified when people view their financial picture holistically, rather than as a single retirement account.
New RGA behavioral science research into annuities reveals that understanding of lifetime income products such as annuities is remarkably low. In the 2026 study, UK-based 50+-year-olds assigned to the control group correctly answered only half of the questions on a comprehension test of information about a fictional but realistic individual annuity product. Similarly, a 2024 U.S. study showed that only 9% of consumers felt very knowledgeable about annuities; for consumers who own an annuity, only 32% felt very knowledgeable.9
Part of the reason for this low comprehension is that available solutions are complex, with difficult-to-understand features, trade-offs, and fee structures. For advisors, consultants, plan sponsors, and upcoming retirees, this creates inertia bias – the tendency to stick with the status quo, even when it would be beneficial to change.
RGA’s recent initial annuities research demonstrates that applying behavioral science principles to these products can increase comprehension and, more importantly, adoption. Average scores on a multiple-choice comprehension test were 11% higher for those who saw a version of the annuity product description enhanced using behavioral science techniques. The score improvements were driven largely by simplification, which yielded 9% higher average scores alone.
In addition, significantly more people were willing to annuitize any proportion of their savings when they saw the enhanced versions, driven by simplification and reframing. More people also indicated they would elect to annuitize all of their savings.
RGA is currently expanding on its behavioral science research into annuities and will present new findings on how companies can overcome these challenges. The goal is to lead the discussion to innovate next-generation solutions to mitigate the growing concern over lifetime income gaps. The question in need of answers is clear: Starting with a blank slate and going beyond today’s limited options, what solutions would best address this challenge?
SECURE and SECURE 2.0 – the landmark legislative packages designed to expand access to workplace retirement plans – increase savings limits, simplify plan administration, and remove structural and operational barriers that have historically limited the use of annuities in 401(k) plans. Key changes, including the introduction of a fiduciary safe harbor and improved portability, have made plan sponsors more comfortable with adopting lifetime income solutions and have helped drive a wave of product innovation.
However, this is just the first step in a long journey to truly embed lifetime income solutions into DC plans.
To move from availability to adoption, federal regulations need to address simplification in both how plan sponsors select products and how participants interact with them. Clearer guidance around insurer and product selection, portability, and participant-facing rules – such as annuitization defaults – will enable plan sponsors and participants to more easily adopt these solutions.
In March 2026, the Department of Labor released a proposed regulation, Fiduciary Duties in Selecting Designated Investment Alternatives. The guidance, when enacted, will make it clearer and safer for annuity-based solutions to be included within Qualified Default Investment Alternatives (QDIAs), as long as fiduciaries follow a prudent, principles-based process.
Allowing lifetime income solutions to be embedded within QDIAs is the first step toward achieving wider adoption. But to see meaningful uptake, the next step is to allow for retirement programs that convert into lifetime-income products by default.
Behavioral research has shown that people tend to adopt the status quo or “default” scenario, particularly when choices are complex and preferences are weak. This is a major reason for the success of auto-enrollment and auto-escalation within plan sponsor 401(k) plans in the U.S. In one early implementation of an automatic escalation program, average saving rates increased from 3.5% to 11.6% over 28 months among participants enrolled in automatic escalation programs.10 Additionally, modeling shows that adding automatic escalation to 401(k) plans can reduce retirement savings shortfalls by up to 9%.11
What works well in 401(k) plans has the strong possibility of working well to promote responsible lifetime income.
A benefit like the one offered to Linda should feel indispensable. Yet today, the combined weight of timing, human behavior, and regulation continues to hold adoption back.
That window is closing. As pensions fade, Social Security faces mounting strain, and a new generation approaches retirement without guaranteed income, the status quo will no longer hold. What looks like inertia today will quickly become urgency.
The implication is clear: Demand for lifetime income will accelerate, and it will reward those prepared to meet it. The organizations that move now to simplify product design, embed behavioral insights, and align solutions with evolving regulatory frameworks will be the ones that define the next generation of retirement income.
The question is no longer whether lifetime income solutions are needed. It is who will lead in delivering them when participants are finally ready to act.
Making financial protection accessible to all requires new thinking about how retirees convert savings into dependable income. Contact RGA to learn how behavioral science can enhance existing annuity solutions and help shape the future of lifetime income.
