The Shift Towards Lifetime Income Options in Retirement Plans
Retirement security is not just about how much employees save, it’s about how long that money lasts.
That’s why more employers are embracing a new evolution in retirement plan design: lifetime income options. Traditionally, 401(k) plans have focused on the accumulation phase, helping employees build savings during their working years. But what happens when it’s time to draw from those savings?
Enter lifetime income solutions such as annuities, which are becoming an increasingly important modern retirement planning. With recent legislation and changing employee expectations, the landscape is shifting, and smart employers are taking notice.
In this article, we’ll explore why lifetime income options are gaining traction, what they mean for your 401(k) plan, and how your company can adapt while staying compliant.
Why Lifetime Income Is Getting Attention
Several key trends are driving the rise of lifetime income features in retirement plans:
- Longer lifespans are causing employees to worry about outliving their savings.
- Traditional pensions are disappearing, leaving a gap in guaranteed income.
- Regulatory support from the SECURE Act and SECURE 2.0 has made it easier for employers to offer annuities within retirement plans.
- Employees want more certainty and increasingly prefer reliable monthly income in retirement rather than a lump sum.
As a result, lifetime income options are no longer seen as niche; they’re fast becoming a critical piece of the retirement puzzle.
What Are Lifetime Income Options?
Lifetime income options are plan features that allow employees to convert their retirement savings into guaranteed income for life. The most common example is an annuity, which provides a stream of income during retirement, like a traditional pension.
These options can be built into a 401(k) plan as either:
- In-plan annuities, which are purchased and managed within the plan
- Managed payout funds, which gradually withdraw funds in a structured way
The main advantage is predictability. Instead of depending on market performance or self-managed withdrawal, employees have access to income they cannot outlive.
Benefits for Employers and Employees
For Employees:
- Peace of mind with income that lasts a lifetime
- Less pressure to manage withdrawals in retirement
- Protection against market downturns later in life
For Employers:
- Enhanced retirement benefits that improve recruiting and retention
- Differentiation from competitors who offer more basic plans
- Alignment with new compliance-friendly options under the SECURE Act
Offering lifetime income options shows employees that your company supports their long-term financial well-being, not just their transition into retirement.
Important Considerations Before Offering Lifetime Income Options
While the idea of guaranteed retirement income is appealing, implementing it requires careful consideration:
- Fiduciary Responsibility: Selecting annuity providers adds fiduciary responsibility. Employers must ensure products are sound, reasonably priced, and offered by reputable insurers.
- Plan Design Adjustments: Adding in-plan annuities or other income features may require amendments to your existing plan structure.
- Employee Education: Lifetime income features are only beneficial if employees understand how they work. Clear, compliant communication is key, typically coordinated through your advisor or recordkeeper.
At Maxus Plan Solutions, we don’t select investments or sell annuities. However, collaborate with your advisor and recordkeeper to ensure your plan design and operations accommodate these features effectively.
How Maxus Plan Solutions Helps Modernize Your Plan
We know that retirement planning is evolving. Our role is to help your business stay ahead while staying compliant.
Here’s what we offer:
- Custom Plan Design: We tailor your 401(k) structure to include in-plan annuities or managed payout features if desired.
- Compliance Support: Lifetime income features come with specific rules. We help keep your plan aligned with IRS and DOL regulations.
- Smooth Coordination: We work alongside your financial advisor and recordkeeper to implement changes smoothly.
- Ongoing Oversight: As regulations and expectations shift, we keep your plan up to date, so your benefits continue to serve your team and your business.
The Future of Retirement Is Income-Oriented
In an era where retirement feels more uncertain than ever, offering predictable, reliable income options can make all the difference.
Employers who integrate these features now will be seen as leaders in building modern, employee-first retirement plans.
If you’re ready to explore how lifetime income options can fit into your company’s 401(k), Maxus Plan Solutions is here to help.
We make sure your plan is ready for whatever the future holds.