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Vanguard Unveils Target-Date Series With Annuity Access

Observant1
edited December 4 in Other Investing
"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."

https://www.morningstar.com/funds/vanguard-unveils-first-new-target-date-series-since-2003

Comments

  • Observant1
    edited December 4
    "Vanguard, the nation’s leading provider of target date solutions*,
    is deepening its commitment to retirement innovation through a collaboration with TIAA,
    a pioneer and leader in guaranteed lifetime income.
    This collaboration brings together two trusted names in the retirement industry to deliver
    a retirement income solution designed to provide retirees access to a guaranteed income stream for life."

    "'Retirement isn’t one-size-fits-all, and for those who want more predictability,
    guaranteed income can provide added peace of mind alongside their savings,'
    said Lauren Valente, Managing Director and Head of Vanguard Workplace Solutions.
    'In working with TIAA, another mission-driven organization, we’re giving participants
    an option to turn a portion of their savings into income they can count on for life.'"
    https://corporate.vanguard.com/content/corporatesite/us/en/corp/who-we-are/pressroom/press-release-vanguard-launches-target-retirement-lifetime-income-trusts-120325.html

    * Source: Based on AUM market share of the TDf industry. Sources: Vanguard and Morningstar, Inc.,
    as of September 30, 2025.
  • yogibearbullyogibearbull
    edited December 4
    Lifetime income options within 401k TDFs have been allowed under SECURE 1.0 (2019) and streamlined further under SECURE 2.0 (2022). It has taken fund firms (with TDFs) and insurers (with lifetime income or out-of-favor-term annuities) that long to implement this.

    Vanguard is only the latest to implement this. Interesting that low-cost fund firm (Vanguard) and low-cost annuity firm (TIAA) have partnered on this. After all, some call TIAA "Vanguard of annuities".

    For most stable-value accounts (like TIAA SIA mentioned in the OP link or more familiar TIAA Traditional), quoted are interest rates credited, and the ERs aren't relevant. TIAA runs many from its General Account, so it is difficult to figure out some sort of ER for its SVs.

    BTW, lifetime income options have been available for 403b and Fed TSP for decade. So, folks with those may be wondering what all this fuss is about. All this is new to 401k.
  • Observant1
    edited December 4
    YBB,

    Thanks for providing additional context.
    I know you are very knowledgeable about TIAA.
    Partial annuitization of TDFs may be appealing to certain retirees.
  • Observant1
    edited December 4
    The WSJ provides additional details regarding Vanguard's new TDf series and other firms' offerings.
    https://www.msn.com/en-us/money/markets/vanguard-joins-push-to-offer-401ks-with-a-regular-payout/ar-AA1RDbFc
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