Who builds the income when the pension disappears?

Traditional pensions continue to fade from the private sector. As of March 2025, just 14 percent of private industry workers had access to a defined benefit plan, according to the U.S. Bureau of Labor Statistics, well below the levels that defined retirement a generation ago. In its place stands the 401(k) generation, in which the burden of funding, managing and making retirement income last, has shifted almost entirely from employers to individuals. For Gen X and the cohorts behind them, that means converting a lifetime of savings into an income source that may need to last 30 years or more.

That structural shift, more than any demographic tailwind, is what Dan Biagini believes is moving fixed index annuities from a peripheral allocation into the center of retirement planning. Dan Biagini, SVP, head of independent sales at American Equity, whose IncomeShield fixed index annuity products are built around lifetime income guarantees, says the demand he is hearing from advisors has changed in character, not just in volume.

“The focus on income certainty is being driven by the convergence of market volatility, longer lifespans, and the continued shift away from traditional pensions,” says Biagini. “People are recognizing that portfolio management is not just about accumulating assets. It is about turning those assets into reliable income that can last for decades.”

Rethinking the risk-return trade-off

Advisors trained on risk-return trade-offs sometimes resist the principal-protection conversation, but Biagini says the comparison set has shifted. Traditional fixed income has produced historically lower yields and increased volatility, and that has changed how index-linked crediting strategies stack up on an after-tax basis.

“Yes, clients are giving up some upside potential in exchange for principal protection,” says Biagini. “The opportunity to receive market-linked growth without exposure to loss can make fixed index annuities attractive when compared to the after-tax return on bonds.”

The feature he points to most often is one no other product can replicate: the ability to convert a balance into income that cannot be outlived. For clients relying solely on systematic withdrawals, the planning math requires conservatism to absorb sequence-of-returns risk and longevity. Annuities transfer that risk to the insurer.

“This structure, combined with the ability for insurers to diversify among higher yielding investments and access institutional pricing, allows for competitive accumulation potential and efficient income generation,” says Biagini. “That can translate into higher payout levels than traditional withdrawal strategies.”

A reset in product design

The way the industry designs guaranteed income has changed more in the past three years than in the prior decade. Higher interest rates reset the economics of guaranteed income, and product design grew more sophisticated alongside them. Today’s product structures including American Equity IncomeShield fixed index annuities, increasingly separate the accumulation and income phases, letting clients participate in market-linked growth while locking in a protected income floor.

“We’ve deliberately moved away from complex, black-box indices toward strategies tied to recognizable, broad-based benchmarks, ones clients can follow and advisors can explain,” says Alex Locke, chief product officer at American Equity. “Volatility-controlled benchmarks also typically allow us to offer higher caps and participation rates.”

What can actually drive increased adoption

Demographics are routinely cited as the tailwind for annuities, but Biagini says demographics alone will not drive purchase decisions. Two factors will: education and access.

“Annuities have historically been difficult for many clients to understand,” he says. “Adoption increases when the discussion shifts from ‘Should I buy an annuity?’ to ‘What risks do we need to manage in retirement?’”

On access, Biagini says American Equity’s next-generation eApplication platform with built-in suitability logic, has reduced manual suitability reviews from 40 percent of cases to under 8 percent, with a not-in-good-order rate below one percent. Average speed to answer in the call center is 55 seconds year-to-date.

“We know financial professionals don’t have time to sit and wait on the phone,” says Biagini. “Time is money.”

Retirement, he adds, is no longer organized around a single date. Many Gen X clients are pursuing second careers or moving gradually from full-time work to part-time income, which is reshaping the planning brief.

“The goal is to help clients move into each phase of semi to full retirement with confidence,” says Biagini, “the different phases of retirement have different income needs. Our products allow financial professionals to tailor solutions to the client's needs and time horizon to deliver dependable benefits when needed.”

^{Annuity contract and/or Rider(s) issued under form series ICC22 BASE-IDX, ICC23 BASE-IDX, ICC23 IDX-10-10, ICC22 IDX-10-7, ICC20 E-PTP-C, ICC20 E-PTP-PR, ICC20 E-MPTP-C, ICC24 E-BPT, ICC20 R-EBR, ICC16 R-MVA and state variations thereof. Availability may vary by state. For complete details please see product specific sales brochure(s) and disclosure(s).}

^{This material is for informational purposes only, and is not a recommendation to buy, sell, hold or rollover any asset. It does not take into account the specific financial circumstances, investment objectives, risk tolerance, or need of any specific person. In providing this information American Equity Investment Life Insurance Company is not acting as your fiduciary as defined by the Department of Labor. American Equity does not offer legal, investment or tax advice or make recommendations regarding insurance or investment products. Please consult a qualified professional.}

^{Guarantees are based on the financial strength and claims paying ability of American Equity and are not guaranteed by any bank or insured by the FDIC.}

This article is produced in partnership with American Equity