Impact of Guaranteed Lifetime Income on Retirement Spending

This technical report examines the effects of guaranteed lifetime income solutions on retirement spending for individuals participating in defined contribution plans. It outlines findings from a persona analysis that reveals an average increase of 22% in potential retirement spending when such solutions are embedded in target date funds. The report highlights that lower-income workers can see a 25% increase in their spending ability, while middle-income workers benefit from increased spending certainty and reduced longevity risk. The analysis also considers how guaranteed income can enhance the retirement experience across different income segments, including higher-income workers who may still gain an 18% increase in potential spending. The report discusses the implications of transitioning from defined benefit plans to defined contribution plans and the importance of providing guaranteed income options to improve retirement outcomes. It emphasizes the need for plan sponsors to understand the varying benefits across different employee demographics to optimize retirement income strategies.