Vanguard is aiming to make generating income from your target-date fund in retirement easier. The firm announced it has launched a new target-date series that gives investors the option to incorporate an annuity. this will be Vanguard’s first new target-date series as introducing the original Vanguard Target Retirement series in 2003. The Vanguard Target Retirement Funds have remained the most popular target-date strategy, representing more than a third of the over $4 trillion invested in target-date funds.

The Vanguard Target Retirement Lifetime income series follows the same glide path as the flagship funds until age 55, when it begins allocating to the TIAA Secure Income Account, a savings annuity. A savings annuity lets you build up money over time and later convert it into an income stream for life backed by the insurance company. By age 65, the annuity portion will reach 25% of the portfolio, and investors can decide whether to convert that portion into lifetime income payments.This series will only be available through defined-contribution plans,such as 401(k)s.

The TIAA Secure Income Account carries no explicit expense ratio, so total costs are expected to be the same or lower than Vanguard’s standard Target Retirement Funds.Fees start at 0.08% for the mutual fund and can be lower for collective investment trusts, depending on plan size.

Improving Target-Date retirement Income Outcomes

Regular target-date funds without an annuity are designed to grow wealth during working years and gradually reduce risk as retirement approaches, not to deliver a steady, predictable income in retirement. While they can support retirement spending, doing so still requires a careful withdrawal strategy to balance income needs, market volatility, and leaving money for heirs. Target-date funds with embedded annuities are designed to make generating a reliable income more straightforward. Income annuities may also help mitigate market volatility early in retirement, when sequence-of-returns risk is greatest.

Retirement Income Still Needs a Plan

Retirement income, however, still doesn’t have an easy button. Even with embedded annuities, people must understand how the income feature works, when to start it, and how it fits into their overall retirement plan.

All-in-One Solutions Require Going All-In

Target-date funds with embedded annuities are designed to manage a person’s entire retirement savings, but many older workers, those closest to retirement, don’t invest their full 401(k) in a single target-date fund. Fidelity’s Building financial Futures report shows that less than half of baby boomers who hold a target-date fund put 100% of their savings into it.

This limits their ability to fully use the annuity feature. To illustr