Will adding annuities to 401(k) plans alleviate the retirement crisis?

investmentnews.com:

No two ways about it, the retirement crisis is coming. And while lifetime income solutions like annuities may not solve the entire problem, they certainly won’t hurt.

An estimated 40.6% of all U.S. households headed by someone aged 35 to 64 are projected to run short of money during retirement, according to the Employee Benefits Research Institute’s Retirement Security Projection Model. The shortfall is pegged at $100,000, impacting 100 million Americans, or roughly one in three citizens.

With Social Security failing to cover a retiree’s post-employment needs, especially now that people are living longer, the demand for lifetime income strategies in America’s under-stuffed 401k plans keeps rising.

A recent Allianz Life study found that nearly seven in 10 (68%) people would like more information about annuities as part of their plan, up from 62% in 2022 and 56% in 2021. At the same time, 67% say they would consider adding an annuity to their plan if it were available, up from 60% in 2022 and 59% in 2021.

Robert Pearl, co-founder and wealth advisor at G&P Financial, says certainty and happiness are the largest benefits of adding an annuity option to employer-sponsored retirement plans.

“Personality research shows us that around two-thirds of people have their primary or secondary motivation as certainty. We also know that retirees with a pension have happier retirements than those who do not have a pension, so the ‘personal pension’ or annuity will create income in retirement like a paycheck,” said Pearl.

Tim Pitney, head of lifetime income solutions at TIAA, says the market has seen more than 80% of new entrants in retirement plans opt for target-date funds since the Pension Protection Act was passed in 2006. But in his