Vanguard and the Teachers Insurance and Annuity Association of America (TIAA) have launched a new option for workplace savers that blends target-date investing with guaranteed lifetime income. Announced in December 2025, the “Target Retirement Lifetime Income Trusts” pair Vanguard’s widely used target-date strategy with an income guarantee from TIAA, aiming to help retirees convert savings into a steady paycheck in retirement.
The trusts are designed for employer plans such as 401(k)s and 403(b)s and embed an annuity component directly in the investment mix to address longevity risk—the chance of outliving your savings. Vanguard says this is its first significant addition to its target-date lineup in two decades.
Key Takeaways
- Historic Partnership: Vanguard has partnered with TIAA to combine low-cost investment management with guaranteed lifetime income solutions.
- New Structure: The new Target Retirement Lifetime Income Trusts are Collective Investment Trusts (CITs) designed specifically for employer-sponsored plans.
- Guaranteed Income: The trusts incorporate the TIAA Secure Income Account to provide a predictable, steady stream of cash in retirement.
- Addressing Longevity: The product is built to help retirees manage the risk of running out of money as life expectancies increase.
Why is the Vanguard–TIAA partnership significant?
This collaboration brings together two large institutions with distinct strengths. Vanguard is known for low-cost index investing and target-date funds, while TIAA has over a century of experience managing annuities and paying lifetime income.
For years, the retirement industry has tried to solve the “decumulation” challenge—helping retirees turn a nest egg into sustainable income. By integrating TIAA’s Secure Income Account into a target-date framework, Vanguard is leaning into income stability, not just asset growth, for the years after a worker stops earning a paycheck.
Understanding “Guaranteed Lifetime Income”
Guaranteed lifetime income means a portion of your retirement paycheck is intended to remain stable for life, regardless of market swings.
The core innovation in these trusts is the inclusion of an annuity component. In a standard target-date fund, your allocation gradually shifts from stocks to bonds as you age. In these new trusts, part of the portfolio is directed to an annuity contract that offers a defined payout for life. This process—annuitization—converts a portion of your balance into recurring lifetime payments.
What does guaranteed income mean for you?
In practice, “guaranteed income” means that a portion of your monthly cash flow is designed to remain steady even if markets fall. It works similarly to a pension or Social Security, creating a base layer of income for essentials like housing and healthcare. As with any insurance product, guarantees depend on the claims-paying ability of the issuing insurer.
What is a Collective Investment Trust (CIT)?
CITs are pooled investment vehicles used in employer-sponsored retirement plans. Structured as trusts rather than mutual funds, they follow a governing trust document and are available to qualified plan participants. Here, the CIT format packages a target-date glide path with an embedded guaranteed income option for the decumulation phase.
How These Trusts Actually Work
The Target Retirement Lifetime Income Trusts operate like traditional target-date funds during your working years, with an added step as you near retirement.
How does the annuity component fit in?
As an employee saves over time, the trust invests in stocks and bonds and gradually becomes more conservative. As retirement approaches, a portion of the assets is allocated to the TIAA Secure Income Account. At retirement, the participant can “turn on” this income stream and convert that portion into regular payments.
Is this different from buying an annuity on your own?
Yes. Buying a retail annuity can be more costly and complex. Embedding the option inside a large workplace plan (via a CIT) aims to deliver institutional pricing and simpler access. It also streamlines the process so savers do not have to shop for and manage a separate insurance product.
When do payments start and how flexible is it?
Participants can choose whether and when to annuitize the allocated portion at retirement, subject to plan rules and distribution options. Specifics depend on the plan’s documents and the annuity’s terms.
Who Benefits From These Trusts?
Not every investor needs or wants an annuity. These trusts are designed for workers who value predictable income within a defined contribution plan.
Is this right for your retirement plan?
The trusts are built for the 401(k)/403(b) market. If you worry about a market downturn reducing your savings at the wrong time, this type of fund can help create a steady income floor to supplement Social Security. Eligibility, portability, and timing depend on your employer’s plan and recordkeeper. As with any annuity, insurer financial strength may matter to some investors.
Pros and Cons for Your Retirement
While guaranteed income is appealing, it comes with trade-offs to consider.
What are the main advantages?
- Security: You cannot outlive the income generated by the annuity portion.
- Simplicity: The annuity is integrated into one fund, reducing the need to manage separate products.
- Professional Management: Vanguard oversees the asset allocation glide path.
Are there downsides to locking in income?
- Liquidity: Funds directed to the annuity portion may be harder to access for lump-sum needs than assets in a standard bond fund.
- Complexity: Payout rates and contract terms can be harder to evaluate than a traditional mutual fund.
- Availability: You can only access these trusts if your employer offers them in the plan.
What’s next for retirement security in defined contribution plans?
This launch reflects a broader shift as fewer workers have traditional pensions and more rely on 401(k)-style accounts. Products that blend market exposure with insurance guarantees are likely to remain part of the conversation as plans look to support retirees’ spending needs. For now, plan sponsors and recordkeepers will assess costs, operational complexity, and fit alongside existing investment options, while workers focus on availability, terms, and the trade-off between flexibility and guaranteed income.
