Do Lifetime Guarantees Drive Better Retirement Outcomes?

Do Lifetime Guarantees Drive Better Retirement Outcomes?
October 2025
Retirement security depends in part on having sufficient income to cover all expenses; knowing that this income is guaranteed for life can drive investor confidence. LIMRA research has demonstrated that “peace of mind” is a phrase that investors closely associate with lifetime-guaranteed income (LGI). Regardless of personal and household characteristics, nearly 9 in 10 investors agree that LGI is important for peace of mind in retirement, according to surveys of workers and retirees, aged 40 to 85, with $100,000 or more in household investable assets, in 2024 and 2025.
Freedom from the fear of running out of money in retirement should enable better outcomes, including more confident investment and spending decisions and a greater enjoyment of retirement. If so, then individual annuities, which can supply LGI, should be a central part of retirement income planning. But is it the LGI, or the specific components that comprise LGI, that really matter?
The positive sentiment often expressed toward LGI may refer to Social Security and workplace defined benefit (DB) pensions (including income being received by spouses or survivors), as opposed to individual annuities — possibly because these income sources are not seen in terms of an asset being converted into guaranteed income. In that case, all else being equal, a higher proportion of retirement income in the form of Social Security or pension benefits should also drive more positive outlooks.
As it turns out, simply having “more” LGI does not predict better outcomes, at least in terms of investors’ own assessments and confidence. In the 2025 survey, retirees identified all sources of household income, including annuities (and whether the annuity income was guaranteed for life). They were also asked whether they agreed or disagreed with a series of positive statements about their retirements.
Those who “strongly agreed” with at least two of the three statements, representing about one quarter of retirees, were categorized as having “high confidence.” Interestingly, retirees with a higher proportion of LGI were less likely to report better outcomes — especially among wealthier households.
The likelihood of being assigned to this top-quartile high-confidence group decreased as the proportion of the household’s income attributable to LGI sources (Social Security, pensions, or lifetime-guaranteed annuities) increased. When controlling for household investable assets, this downward trend was evident among the wealthiest investors, but otherwise, there was no clear association between LGI proportion and sentiment.
To understand why more LGI doesn’t lead to more satisfied retirees, the individual components of LGI need to be examined. Retirees for whom a large proportion of their LGI is provided by Social Security tend to be in worse financial shape than retirees for whom Social Security is a small proportion.
When controlling for wealth, retirees with larger proportions of their LGI from Social Security are less likely to be assigned to the high-confidence group (Table 1). Conversely, retirees with larger proportions of their LGI from DB pensions are more likely to be in the high-confidence group. Similarly, LGI from annuities was linked to better outcomes, but only for certain wealth segments: those with $500,000 to $1.9 million in household investable assets.
Percentage of retirees | Percentage Assigned to “High-Confidence” Group | |||||
Household Investable Assets | ||||||
All retirees | $100,000 to $499,999 | $500,000 to $999,999 | $1 million to $1.99 million | $2 million or more | ||
Social Security benefits make up: | ||||||
Under 40% of LGI | 0.25 | 0.35 | 0.27 | 0.37 | 0.38 | 0.46 |
40 to <65% of LGI | 0.23 | 0.27 | 0.17 | 0.3 | 0.39 | 0.43 |
65 to 99% of LGI | 0.22 | 0.23 | 0.14 | 0.21 | 0.37 | 0.43 |
100% of LGI | 0.3 | 0.19 | 0.12 | 0.15 | 0.25 | 0.47 |
DB pension benefits make up: | ||||||
None | 0.41 | 0.2 | 0.13 | 0.17 | 0.29 | 0.42 |
Under 60% of LGI | 0.36 | 0.27 | 0.16 | 0.29 | 0.36 | 0.47 |
60 to 100% of LGI | 0.23 | 0.34 | 0.26 | 0.32 | 0.39 | 0.46 |
Annuities (lifetime) make up: | ||||||
None | 0.78 | 0.25 | 0.17 | 0.23 | 0.33 | 0.47 |
Any % of LGI | 0.22 | 0.27 | 0.17 | 0.32 | 0.39 | 0.39 |
All retirees | 1 | 0.26 | 0.17 | 0.25 | 0.34 | 0.45 |
Annuity income usually does not represent a major share of any retiree’s total household income — across all surveyed retirees with annuity income, it typically represented 10 to 20 percent. Nevertheless, having at least some lifetime-guaranteed annuity income, even if it is on top of existing LGI sources, appears to be beneficial. Among the wealth segments for whom annuity income was linked to better outcomes (with $500K to $1.9M in household investable assets), having any annuity income was usually associated with a greater likelihood of assignment to the high-confidence group, regardless of the proportion of LGI supplied by Social Security or DB pensions (Figure 1).
However, the effect was most pronounced among retirees with no DB pension income, and those for whom Social Security represented about two-thirds or more of their household incomes. For these mass affluent and affluent retirees in particular, annuity income leads to better retirement confidence and satisfaction.
October 2025 Subscribe
AIGG: Driving Responsible AI Adoption in Insurance
Do Lifetime Guarantees Drive Better Retirement Outcomes?
Spotlight on David Payne, VP Employee Benefits at The Standard
Alternatives in 401(k) Plans: Opportunity Meets Opposition
Changing Family Structures Create New Coverage Needs
Protecting Rural Roots With Every Insurance Policy Sold
Timeless Influencers: Can FPs Increase Brand Awareness?
A Tale of Two Products: DI Buyers Choose Security
MarketFacts September 2025 Review