Could Target-Date Funds With Built-In Income Guarantees Be the Next Evolution in Retirement Planning?

With target-date funds falling short on income certainty, retirement plans should integrate guaranteed income solutions to help participants turn their savings into a reliable paycheck. Here is what participants can do.

By Myles J. McHale, Jr. AIF®, CRPP®

published 17 December 2025

in Features

A dart sticks in the target of a dartboard while a tablet screen in the background shows a trading graph.

Qualified retirement planning has entered a new era.

While target-date funds have simplified investing for millions of Americans, they fall short on one critical front: income certainty.

As retirees live longer and market volatility persists, integrating guaranteed income solutions in the target-date funds of qualified plans is no longer optional — it is essential.

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This article explores how qualified retirement plan (QRP) sponsors and participants can leverage these innovations in target-date funds to create a more secure retirement. After all, isn't that the preferred outcome and goal we are targeting?

About target-date funds

Overall, the target-date fund (TDF) market has exploded to about $4 trillion in assets as of the end of 2024, up 15% from the prior year. This includes mutual funds, ETFs and collective investment trusts (CITs), according to Morningstar.

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The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

In the QRP market (401(k) and/or similar types of plans), TDFs are the dominant Qualified Default Investment Alternative (QDIA).

So, what has contributed to this significant growth? Automatic enrollment and default plan updates have driven adoption, with 83% of participants in plans holding TDFs.

Top providers are Vanguard with $1.5 trillion, followed by Fidelity ($560 billion) and T. Rowe Price ($297 billion), according to Investment News.

Offering QRP participants the needed options of incorporating automatic diversification and a glide path into fund selections has been successful, as opposed to letting them try to figure it out on their own. Hence, the time to take the next step is now.

We have spoken and written over the years about the critical gap and shift between the accumulation phase of retirement and the drawdown or spending phase while in retirement. Most retirement planning focuses on saving and growing assets (which counts as the accumulation phase).

But when retirement begins, the challenge shifts to turning those assets into reliable income without running out of money. That is where the gap lies. And, by the way, the No. 1 fear of retirees and soon-to-be retirees is to outlive their assets.

Relying solely on investments can be risky, as income can fluctuate with the markets. A downturn early in retirement can devastate a portfolio, which is categorized as sequence-of-returns risk. It is important to keep in mind that income solutions — such as annuities or guaranteed payout strategies in target-date funds — can help stabilize cash flow.

The importance of guaranteed income

It is a well-known fact that people live longer these days. Without guaranteed income, retirees risk outliving their savings and seeing their biggest fear become a reality.

As workers approach retirement, lifetime income planning certainly remains center stage as income certainty and guaranteed income solutions are now becoming part of the asset allocation mix for TDFs.

Knowing that a portion of income is guaranteed reduces stress and allows retirees to spend confidently rather than hoard assets out of fear of an unknown future.

As a former kicker in high school and college, I think of this retirement scenario as the fourth quarter of a championship game: You have built a strong lead (your savings), but now you need a solid defense to protect it.

Income certainty is like having a solid defense and a reliable kicker — you and your family secure the win no matter what surprises may come at you.

What plan participants can do

Step No. 1: Participants should review their plan's current investment menu. You can log in to your retirement plan portal and check if any target-date funds already include lifetime income features. Please note that these are sometimes called "Income TDF" or "Secure Income Fund."

Step No. 2: If you do not see lifetime income features, you can contact your employer's human resources or plan administrator to ask if the plan offers guaranteed income options within TDFs or if they are currently considering offering them.

You could use the following language: "As I am approaching retirement, I am interested in target-date funds that include lifetime income guarantees. Are these available in our plan?" If the answer is no, you could ask, "Can they be added to address such an important retiree issue?"

If the matter is under consideration, you may want to request that they evaluate marketplace solutions that already are addressing the lifetime income challenge.

Currently, these are the most proactive and successful firms with prudent offerings:

Step No. 3: A plan participant could submit a formal request to HR or the plan's fiduciary body that oversees the QRPs. Most plans have a participant feedback process or investment committee review cycle. Find out what and how your plan's decisions are made and begin the process.

HR is a great starting point, as they can route your "ask" internally. A formal request creates a documented trail and signals participant interest, which can influence current and future reviews.

The bottom line

As changes continue to evolve in the retirement plan legislative arena, no one can say just exactly where we are headed in the QRP marketplace. We do know that by pairing TDFs with guaranteed income solutions, we can transform a retirement plan from a simple investment strategy into a holistic income approach.

By advocating for these options, participants not only secure predictable lifetime income but also enhance the plan's ability to deliver long-term financial confidence.

A formal request today could be the first step toward a more resilient retirement tomorrow. In fact, we would "guarantee" it!

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Myles J. McHale Jr. is the President and Founder of Wealthcare Advisors and Consultants, LLC, with over 40 years of experience in financial services. Wealthcare provides proven and successful financial transitions for individuals and families. He has held leadership roles, including Senior Investment Officer and Regional President at US Bank, Wilmington Trust/M&T Bank, Fleet Investment Services, Chase Manhattan Bank and The Morgan Bank. He has been an Adjunct Instructor at Cannon Financial Institute for the past 15 years, sharing expertise in investment management, charitable foundation management and retirement services.