TIAA Institute Urges Policy Reforms to Strengthen Lifetime Income

The TIAA Institute, in a recent report, urged increased policy reforms to strengthen lifetime income options, noting that defined contribution plans need to evolve beyond retirement savings. 

The report, “Closing the Guarantee Gap,” warned that the shift from traditional pensions to DC plans has left millions of Americans vulnerable to running out of money in retirement. The report called for sweeping reforms to ensure that workers’ savings can provide reliable income throughout their later years. 

TIAA, the parent company of the nonprofit research institute, sells retirement services, including annuities. 

The ‘Guarantee Gap’ Crisis 

The report argued that the retirement system’s transition to defined contribution-style plans from pensions has created a “guarantee gap”—a shortfall in the level of lifetime income security retirees can count on.  

With more than 30 million Baby Boomers entering retirement and living longer than ever, the paper warned that millions could outlive their savings. Especially since, as the report noted, Social Security, which currently replaces about 40% of pre-retirement income on average, faces projected benefit cuts as early as 2033. Those cuts would only happen if Congress fails to shore up the system by then.  

According to the TIAA Institute report, workers are already feeling the pressure regarding adequate income in retirement. The report stated that nearly two-thirds of Americans worry more about outliving their money than about death itself. The report linked this anxiety to the lack of guaranteed income options in DC plans and the declining role of traditional pensions. 

Progress Through SECURE Acts 

Recent legislative changes—the Setting Every Community Up for Retirement Enhancement Act of 2019 and the SECURE 2.0 Act of 2022—have provided regulatory relief for lifetime income options. The laws expanded access to DC plans, improved fiduciary protections for employers offering annuities and required retirement statements to include lifetime income illustrations. Overall participation rates in DC plans have risen to 70% in 2024 from 64% in 2018, largely due to the use of automatic enrollment. 

The legislation also modified qualified longevity annuity contracts—deferred annuities funded by investments from a worker’s retirement plan—and improved portability for in-plan annuities, helping workers preserve income guarantees as they change jobs. Still, the TIAA Institute’s report stated that more must be done to shift DC plans from savings-focused vehicles into a comprehensive retirement security system. 

TIAA Institute’s Proposal for Further Policy Changes 

The brief outlined several key policy priorities to close the guarantee gap: 

• In-service rollovers for workers aged 50 or older to allow early retirement income planning; 

• Expansion of annuity and payout options within DC plans, giving retirees the choice of guaranteed lifetime income or managed withdrawals; 

• Access to collective investment trusts for 403(b) plans, extending the investment options to millions of public and nonprofit workers; 

• Inclusion of gig workers—who the TIAA Institute estimated now make up 37% of the U.S. workforce and largely lack retirement coverage—through pooled employer plans; and 

• Education reforms to improve “longevity literacy,” addressing the fact that only 12% of adults demonstrate a strong understanding of life expectancy planning . 

Rising Demand for Guaranteed Income 

According to the report, the changes are necessary to match rising demand for lifetime income solutions. Nearly 70% of workers say they want annuity options inside their retirement plans, preferring to buy their retirement income using small regular contributions, rather than making lump-sum purchases later, according to the report. Among employers, 72% expressed interest in target-date funds that include guaranteed income features, and 40% said they are already considering adding annuities. 

Annuities, per the TIAA Institute report, protect against seven major risks—including outliving savings, medical costs, market volatility and cognitive decline. Research cited in the brief showed that 93% of annuity owners said they feel financially secure, compared with widespread anxiety reported among retirees without guaranteed income. 

The TIAA Institute emphasized that closing the guarantee gap will require both policy action and industry innovation. As the nation faces the dual pressures of record retirements and potential Social Security cuts, the report urged lawmakers and employers to accelerate reforms that embed lifetime income features in all retirement plans. 

“These recommended reforms,” the report concluded, “will transform DC plans from savings-focused vehicles into a comprehensive retirement security system in which workers can plan to make their savings last throughout their lives in retirement.”