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Do Lifetime Guarantees Drive Better Outcomes?

Author

Matthew Drinkwater, Ph.D., FSRI, FLMI, AFSI, PCS
Corporate Vice President, Annuity and Retirement Income Research
LIMRA and LOMA
mdrinkwater@limra.com

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.

LGI and Retirement Confidence

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.

Table 1. Proportion of Retirees in High-Confidence Group, by LGI Components and Wealth Segment

  Percentage of retirees Percentage Assigned to “High-Confidence” Group
All retirees Household Investable Assets
$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 25% 35% 27% 37% 38% 46%
40 to <65% of LGI 23% 27% 17% 30% 39% 43%
65 to 99% of LGI 22% 23% 14% 21% 37% 43%
100% of LGI 30% 19% 12% 15% 25% 47%
DB pension benefits make up:
None 41% 20% 13% 17% 29% 42%
Under 60% of LGI 36% 27% 16% 29% 36% 47%
60 to 100% of LGI 23% 34% 26% 32% 39% 46%
Annuities (lifetime) make up:
None 78% 25% 17% 23% 33% 47%
Any % of LGI 22% 27% 17% 32% 39% 39%
All retirees 100% 26% 17% 25% 34% 45%
Based on 2,438 retirees who received any combination of income from Social Security, defined benefit pensions, or annuities (lifetime-guaranteed income only). LGI = lifetime-guaranteed income.

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.

Figure 1. Proportion of Retirees in High-Confidence Group, by LGI Components

Based on 1,055 retirees who received any combination of income from Social Security, DB pensions, or annuities (lifetime-guaranteed income only) and whose household investable assets were $500,000 to $1.9 million. LGI = lifetime-guaranteed income. Note: “Has LGI from annuities” result for “60% to 100%” proportion of LGI from DB pensions based on low sample size (n = 30).

Take-Aways

  • Not all LGI is equal. Retiree sentiment is more strongly influenced by the source of LGI than by the total amount. DB pensions are most positively associated with higher confidence, while heavy reliance on Social Security correlates with lower confidence. Retirement income strategies should consider not just the presence of LGI, but its composition. A diversified mix — especially one that includes DB pensions or annuities — may drive optimal retiree well-being.

  • Annuities can enhance outcomes — selectively. Lifetime-guaranteed annuity income is linked to marginally better retiree confidence, particularly among those with no DB pension income. For the wealthiest retirees, the mix of income sources is less impactful on confidence. But among mass affluent and affluent retirees with $500K to $1.9M in investable assets, annuities can “top off” LGI effectively, and could mean the difference between a good retirement and a great one.

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