Hybrid Annuity TDFs – A New Breed of TDFs
New research explores how hybrid annuity target-date funds could reshape retirement income security
As the retirement industry shifts from defined benefit to defined contribution plans, the need for innovative income solutions is more urgent than ever. In a new Institute Note, Ankul Daga, senior manager at Vanguard and research fellow with the Retirement Income Institute, examines how hybrid annuity target-date funds (TDFs) could transform the way plan participants generate secure income in retirement. Daga’s research highlights how blending guaranteed lifetime income with traditional investment strategies can create a more resilient, personalized path to retirement — improving outcomes while addressing risks like market volatility and longevity.
Hybrid annuity TDFs could offer participants a powerful new way to balance income security with financial flexibility in retirement.
Drawing insights from Vanguard’s Voice of Client study and advanced modeling through the Vanguard Life-Cycle Investing Model (VLCM), Daga demonstrates the potential value of systematically allocating to annuity solutions within TDFs. By offering participants a new way to combine growth and income guarantees, hybrid annuity TDFs can help bridge the gap between saving and spending phases — ultimately providing more confidence, flexibility, and security throughout retirement. However, widespread adoption will depend on overcoming challenges around cost, portability, and participant education.