Vanguard is aiming to make generating income from your target-date fund in retirement easier. The firm announced it has launched a new target-date series that gives investors the option to incorporate an annuity. This will be Vanguard’s first new target-date series since introducing the original Vanguard Target Retirement series in 2003. The Vanguard Target Retirement Funds have remained the most popular target-date strategy, representing more than a third of the over $4 trillion invested in target-date funds.

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.

Improving Target-Date Retirement Income Outcomes

Regular target-date funds without an annuity are designed to grow wealth during working years and gradually reduce risk as retirement approaches, not to deliver a steady, predictable income in retirement. While they can support retirement spending, doing so still requires a careful withdrawal strategy to balance income needs, market volatility, and leaving money for heirs. Target-date funds with embedded annuities are designed to make generating a reliable income more straightforward. Income annuities may also help mitigate market volatility early in retirement, when sequence-of-returns risk is greatest.

Target-Date Funds With Annuities Slowly Gaining Traction

Vanguard is not the first to combine target-date funds with annuities. BlackRock’s LifePath Paycheck, launched in 2024, has gained early traction. Its assets grew from $9 billion in May 2024 to $25.7 billion by October 2025, while other target-date funds offering annuity options increased from $1.4 billion to $3 billion. These figures do not include Alliance Bernstein’s custom target-date funds with annuities or managed accounts that incorporate annuities, such as TIAA’s RetirePlus program.

Even with growth, $29 billion in annuity-enhanced target-date funds is still a tiny fraction of the more than $4 trillion invested in target-date strategies. Adoption is expected to remain slow because of the added complexity of annuities and the need for better education on how to use them effectively.

Education and Engagement Remain Key Challenges

Education is a major obstacle for broader adoption, not just for plan sponsors and advisors, but for participants who are expected to use these products. Firms like BlackRock have invested in websites, calculators, and apps that project retirement income, but these tools only work if participants engage with them.

The additional homework for investors runs counter to what has made target-date funds so popular: They require little effort.

Features like auto-enrollment automatically place employees in a default investment, usually a target-date fund, making saving almost effortless. At the end of 2024, 61% of plans offered auto-enrollment, up from 54% in 2020, according to Vanguard’s How America Saves 2025 report. Retirement income, however, still does not have an easy button. Even with embedded annuities, participants must understand how the income feature works, when to activate it, and how it fits into their overall retirement plan.

All-in-One Solutions Require Going All-In

Target-date funds with embedded annuities are designed to manage a participant’s entire retirement nest egg, but many older workers, the ones closest to retirement, do not invest their full 401(k) in a single target-date fund. Fidelity’s Building Financial Futures report shows that less than half of baby boomers who hold a target-date fund allocate 100% of their savings to it.

This limits their ability to take advantage of the annuity feature fully. To illustrate, consider two 65-year-old women retiring next month—a target-date fund purist who puts all her savings in one fund and a target-date fund tourist who owns more than one offering. Immediateannuities.com estimates that they could annuitize part of their portfolios at a rate of 7.6% as of November 2025.

By retirement for the purist, the fund allocates to the annuity strategy 25% of the $1 million she has in a 401(k) target-date fund with an annuity. She could convert $250,000 into a lifetime income stream of nearly $1,600 per month.

The tourist, meanwhile, splits her $1 million portfolio evenly, with 50% in the target-date fund and 50% in other investments. With the target-date fund still allocating 25% to the annuity, she would convert only $125,000 into an annuity, producing roughly $800 per month.

The example highlights how investing outside the target-date fund reduces guaranteed income. Deciding how much to annuitize is highly personal and depends on other income sources, risk tolerance, and spending needs. Estimating monthly expenses can be difficult, making the decision even more complex.

Can the Vanguard Effect Work on Annuities?

Annuities often carry a reputation for complexity and opaque fees. Vanguard’s Target Retirement Lifetime Income series, along with similar offerings from competitors, aims to simplify the process, increase transparency, and make predictable retirement income more accessible. Adoption will likely remain gradual because of education and engagement challenges, but Vanguard’s entry could accelerate interest in these strategies. Whether they ultimately improve retirement outcomes for investors, however, remains uncertain.

Emerson Smith, associate at Morningstar, contributed to this article.