TIAA and Nuveen’s target-date lifetime income strategies, across the companies’ corporate, educational, governmental and health care retirement plan businesses, have surpassed $50 billion in assets under management and have reached 1 million accounts, according to the firm’s announcement on Wednesday.

The number of accounts doubled in less than one year, and more than 600 employers are currently offering TIAA and Nuveen’s lifetime income-embedded target-date-fund strategies.

TIAA’s RetirePlus program—the default in-plan retirement income option—was launched in 2014, and Nuveen Lifecycle Income, an off-the-shelf target-date collective investment trust series with the TIAA Secure Income Account embedded into it, was launched in 2023.

Hybrid TDFs that include annuities have gained popularity among plan sponsors looking to offer a form of guaranteed retirement income within their defined contribution plans. Last week, BlackRock announced that LifePath Paycheck, the firm’s hybrid annuity TDF offering, has accumulated $16 billion in assets under management since its launch in April 2024.

Brendan McCarthy, head of retirement investing at Nuveen, attributes the growth of hybrid annuity TDF products to employers’ and participants’ increased comfort with TDFs as default investments.

“Employers … might find offering an individual annuity or anything that’s self-selected a little bit complex for a 401(k) plan,” McCarthy says. “We know participants generally don’t self-select and manage their own 401(k) plan. They like the employer to do it for them via that default fund or target-date fund.”

McCarthy says employers seem increasingly comfortable with embedding the option of guaranteed income into their default TDF, enabling a participant to convert a portion of his assets into income that he cannot outlive during his retirement.

Regarding both TIAA’s RetirePlus program and Nuveen’s Lifecycle Income Index CIT series, McCarthy says, when a participant reaches retirement, he may choose to annuitize a portion of his savings. TIAA also has a call center, and the representatives can counsel people through the annuitization decisionmaking process.

McCarthy argues that a benefit of the Nuveen Lifecycle Income product is that it offers both a TDF and annuity from the same firm. While Nuveen combines the TDF and annuity into one offering, it also allows them to be purchased separately.

McCarthy says participants using these products may decide to annuitize their assets at any point approaching retirement, at retirement or after they retire. The time at which a retirement plan participant is alerted about his option to annuitize could vary, depending on the recordkeeper and employer, McCarthy says.

“We’ve seen massive growth in annuity target-date funds over the past few years, and seven of the top nine target-date-fund companies have [introduced] some form of an annuity target-date product into the market,” McCarthy notes. “In fact, we’re forecasting that the majority of target-date funds over the next 10 years will be annuity target-date funds.”

Other firms that offer hybrid annuity TDFs include Capital Group, home of American Funds; Principal Financial Group; and State Street Global Advisors.

Vanguard research from June 2024 recommended that plan sponsors consider several factors when evaluating whether to offer a hybrid annuity TDF. For example, an annuity component may not be optimal for everyone in the plan, and the appropriate type of annuity, timing and amount of the annuity are likely to vary significantly across all participants. Vanguard suggested that plan sponsors include a few personalization options for more engaged participants so each can tailor the annuity product to meet individual needs.

Portability could also be a concern about these products, as annuity benefits can be harder to transfer to a different plan or recordkeeper than traditional fund investments.