A convergence of forces is reshaping the U.S. retirement landscape. With only about 15% of private-sector workers covered by traditional pensions—and continuing concerns about Social Security's long-term solvency—the burden on individual savings has never been greater.
Asset managers and carriers have responded with in-plan annuity solutions designed to convert savings into guaranteed lifetime income, most commonly embedded within target-date funds (TDFs)—the path of least resistance for sponsors and participants.
Recent Alvarez & Marsal research among participants aged 40–60 highlights the latent demand: Only 3% had heard of in-plan annuities, yet 92% want their employer to offer income solutions, and 84% would be more likely to purchase if automatically included in their plan. Seventy percent ranked guaranteed lifetime income as "most important," with fear of outliving savings scoring 4.29 out of 5.
Despite this, adoption remains low. Only 6–16% of plans currently offer guaranteed in-plan income solutions, with uptake concentrated among larger employers. Participants remain largely unaware.
Yet 2025–2026 marks a potential tipping point. Assets in TDFs with annuity components reached $42 billion by March 2026, up nearly 70% year-over-year. Broader multi-asset portfolios with embedded annuities now exceed $115 billion. TIAA research shows 76% of defined contribution plan sponsors expect demand to grow significantly by 2030. JPMorgan's 2025 survey found 79% of sponsors believe their plans should help participants generate retirement income, and 61% of non-offerers are likely to consider adding an option this year.
Interest is rising. Adoption is not. Here's what's holding it back—and what can accelerate progress.
Common Adoption Challenges
1. Lack of Cohesive Education and Marketing
Industry efforts remain fragmented and provider-specific. A broader coalition is needed to build foundational awareness before stakeholders can meaningfully compare solutions. Without a shared understanding of what in-plan annuities are and how they work, differentiation efforts fall flat.
2. Inconsistent Terminology
Confusion persists between standalone in-plan annuities and TDFs with retirement income features or managed payout strategies. Advisers have historically preferred embedded solutions within the QDIA. The absence of a common taxonomy breeds hesitation and slows adoption across plan sponsors and consultants.
3. Cost and Complexity Concerns
Sponsors cite administrative and operational costs, especially for mid-size and smaller employers. Participants worry about fees and ROI. High-net-worth segments are less cost-sensitive but place greater emphasis on inflation protection and customization. For most plans, perceived complexity remains a significant deterrent to even evaluating solutions.
4. Fiduciary and Litigation Risk
Even with SECURE 2.0 safe harbors for annuity provider selection, fiduciary concerns remain high inside organizations. Only 37% of sponsors feel confident explaining annuity value to decision-makers. The psychological weight of potential litigation often outweighs the regulatory protections currently available.
5. Plan Design and Portability
Participants want simplicity and portability—especially given an average of 13+ job changes over a career. They want a clear answer to: "If I contribute $X, what monthly income will I receive at age Y?" Older participants tend to prioritize flexibility and portability, while younger participants are more interested in accumulation incentives. There is no one-size-fits-all design.
6. Explanation of Benefits at Scale
Participants trust advisors most (4.35 out of 5). Their confidence in researching financial products is high (4.33 out of 5), but confidence in independently purchasing an in-plan annuity drops sharply to 3.42 out of 5. Scaling credible, trusted guidance—whether through financial advisors, trained benefits consultants, or well-designed hybrid models—remains one of the largest barriers to mass adoption.
Driving Adoption with Plan Advisers and Consultants
Advisers and consultants are the most influential gatekeepers. Roughly 90–92% of sponsors work with them, and their recommendations heavily shape what gets evaluated and ultimately adopted. Conversations with experienced plan consultants reveal several practical realities that providers must address.
Advisers Filter Ruthlessly for Fit and Ease
Solutions that feel complex, poorly integrated, or hard to explain to plan committees are quickly dismissed. Recordkeeper-bundled solutions have a clear advantage due to seamless data flows, participant experience, and lower operational lift—if the underlying product delivers clear value. Direct-from-carrier or asset-manager solutions must demonstrate materially better outcomes or stronger fiduciary support to overcome the added friction of an extra vendor relationship.
Fiduciary Risk Perception Is a Major Barrier
Even with safe harbors, fiduciary exposure feels real inside sponsor organizations. Many plan sponsors view involving a trusted fiduciary advisor—whether their existing consultant or a specialized third party—as one of the cleanest ways to satisfy their duties when introducing complex income products. Providers that offer robust due-diligence packages, clear participant outcome data, continuing monitoring tools, and transparent governance support see significantly higher win rates.
Education and Hybrid Support Are Now Table Stakes
Advisers consistently identify participant education and communication as one of the largest remaining hurdles. Hybrid models that combine a plan-level income solution with targeted, personalized guidance at key inflection points (age 55+, termination, or when participants begin thinking seriously about drawdowns) are gaining traction. Pure "do-it-yourself" approaches are viewed skeptically for most participants. Well-designed "do-it-for-me" solutions with smart guardrails and limited, meaningful choice are generally preferred.
Preference for Thoughtful Choice, Not Overload
Sponsors and participants like the idea of having two or three well-designed income pathways rather than a single rigid option. However, the choice must feel meaningful—different risk profiles, liquidity features, or guarantee levels—rather than confusing. True personalization (factoring in age, health, outside assets, and spending goals) is conceptually appealing but often loses to simplicity, cost transparency, and ease of explanation in real plan committee discussions. Winning solutions offer an intuitive core experience paired with a small number of high-value options.
Retaining Terminated and Retired Participants
As plans become more income-focused, attitudes toward allowing former employees to remain in the plan for continuing drawdown are evolving. Advisers see this as both an opportunity for deeper engagement and greater scale, and a new set of fiduciary and operational considerations. Solutions that handle portability, in-plan income, and former-participant servicing seamlessly gain favor.
Adviser guidance is clear: stop leading with product features and start leading with how solutions reduce perceived risk, simplify decisions for sponsors and participants, and improve measurable outcomes.
Driving Adoption with Plan Sponsors
Securing sponsor acceptance is essential—especially through TDF or QDIA defaults—so participants can actually enroll.
Develop Turnkey, Simple In-Plan Solutions
Participants want formulaic transparency: a clear mapping of contributions to future monthly income at a specific retirement age, with limited customization. Standardized, streamlined solutions with straightforward administration are especially attractive to mid-market sponsors who lack the resources or expertise for complex implementations. The rapid growth of TDFs with annuity components demonstrates that embedding income solutions in familiar structures significantly reduces friction.
Offer Flexible but Manageable Menus
Borrowing from the voluntary benefits "cafeteria" model, sponsors can offer a shelf of options that address different participant segments—while avoiding choice overload. Strong defaults paired with decision-support tools are essential. The goal is meaningful choice without overwhelming participants or plan committees.
Tackle Litigation Risk Through Process Excellence
Carriers can help by offering simplified product designs, clear governance frameworks, and options such as funding in-plan income solutions exclusively through employer match or non-elective contributions (reducing participant decision risk). Full use of SECURE 2.0 safe harbors—combined with strong insurer financial ratings, transparent selection processes, and continuing plan committee education—further de-risks adoption for sponsors.
Driving Adoption with Plan Participants
Participant adoption, contribution levels, and long-term retention should be core KPIs for any in-plan annuity provider. Research and adviser feedback point to several high-impact levers.
Design for Radical Simplicity and Portability
Participants value clarity and mobility. Products must deliver an intuitive understanding of the value exchange and accommodate the reality of frequent job changes. Portability features and rollover-friendly design are table stakes for building trust across life stages.
Close the Explanation-of-Benefits Gap
Participants trust financial advisors far more than digital tools or chatbots. Human expertise—whether through financial advisors for higher-net-worth segments or trained benefits consultants and hybrid models for broader populations—will be required in the near term. Clear calculators, scenario modeling, and "If I contribute $X, what monthly income will I receive at age Y?" illustrations are non-negotiable for building confidence.
Provide Credible, Independent Comparisons
Participants want to understand how in-plan annuities compare—not only to other annuity products but also to alternatives such as indexed universal life insurance, real estate, or systematic withdrawal strategies. Credible, easy-to-understand independent or third-party illustration tools will be essential for informed decision-making and for demonstrating relative value.
Demographics matter: younger participants tend to respond to long-term accumulation combined with a guarantee, while older participants and pre-retirees prioritize decumulation security, flexibility, and portability. High-net-worth participants, who already work with advisors at much higher rates, represent an important beachhead for advisor-distributed solutions.
Conclusion
The in-plan annuity market has reached an inflection point. Macro tailwinds—erosion of traditional pensions, heightened longevity awareness, surging assets in TDFs with annuity components, and the SECURE 2.0 framework—have created the conditions for acceleration. But translating interest into widespread adoption will require deliberate, coordinated action across advisers, sponsors, and participants.
Further federal policy clarity (building on SECURE 2.0) and industry collaboration on common terminology, education standards, and best practices would remove significant friction. Carriers and asset managers, however, control the most important variables. They can define clear KPIs for each stakeholder group—adviser recommendation rates, sponsor adoption percentages, and participant enrollment and satisfaction—measure performance rigorously, and iterate quickly with simpler, more trustworthy, and better-designed solutions.
Those who move decisively now—armed with clear evidence of massive latent demand against a backdrop of only 3% awareness—will be best positioned to capture meaningful share of the trillions in defined contribution assets moving into decumulation. The window for leadership in this next chapter of retirement plan innovation is open, but it will not remain open indefinitely.
