Nuveen and TIAA roll out target-date series with annuity feature

investmentnews.com:

Nuveen and its parent company TIAA are the latest to bring a target-date series with an annuity component to the market, a pairing that they say can make 401(k)s perform more like traditional pensions.

On Tuesday the companies announced that product, a target-date collective investment trust series managed by Nuveen and a deferred fixed annuity from TIAA. The target-date series includes three varieties: an all-passive option; an all-active one; and another that blends active and passive.

The firms are not the only ones with ambitions for a segment of the market — BlackRock for example added a product, LifePath Paycheck, in 2020, with several retirement plan clients signing up for that TDF the following year.

A study published earlier this year by the National Bureau of Economic Research found that allocating a portion of target-date assets to deferred life annuities is financially beneficial compared with leaving all assets in a target-date and buying an immediate annuity at retirement. Looking at 1,000 scenarios across 30 years for stock returns, bond returns and Treasury interest rates, the accumulation of deferred life annuities was more often advantageous than waiting to buy an immediate annuity, that report found.

While plan sponsors generally are not asking for target-date funds paired with annuities, they are interested in helping employees prepare for a successful retirement, Jania Stout, senior vice president at OneDigital, said in an email.

“There are only so many ways to do that and Nuveen and TIAA’s solution is a great step in providing this type of an option,” Stout said.

As of late 2022, about one in 20 large retirement plans included a target-date series with an annuity component, according to results of