Employers fret about retirement income

Just 66% say target-date funds do extremely well or very well when it comes to helping plan participants deal with their income needs during retirement.

Employers are becoming more concerned about employees’ access to income during their retirement and are questioning whether target-date funds, the default investment option for the majority of 401(k) plans, do a good job of providing such income, according to a recent survey by TIAA.

The survey shows that 75% of employers responding said target-date funds do extremely well or very well when it comes to helping workers save for retirement, down from 87% in a previous survey in 2020. Just 66% say TDFs do extremely well or very well when it comes to helping plan participants deal with their income needs during retirement, down from 78% in 2020.

In response to a question about their plan’s features, 38% of employers said the biggest feature their plan lacks is access to guaranteed lifetime income.

Currently, just 34% of the employers surveyed offer a guaranteed lifetime income option in their retirement plan.

Providers have begun to roll out TDFs that offer lifetime income. Seventy-two percent of the employers surveyed by TIAA said they’d be interested in a TDF that allocated to a guaranteed lifetime income solution as participants near retirement.

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