The End of Retirement Anxiety? Guaranteed Income Redefines Security

CHICAGO, IL – December 03, 2025 – For decades, the American retirement dream has been a simple equation: save as much as possible. But a growing body of evidence suggests we've been solving for the wrong variable. The true challenge isn't just accumulating a nest egg; it's turning it into a reliable paycheck that lasts a lifetime. A landmark new report from actuarial firm October Three confirms this, revealing a stark divide in the well-being of today's retirees. The firm's 2025 Lifetime Income Report, which surveyed over 1,100 retirees, found that those receiving guaranteed monthly income from a pension or annuity are 30% more likely to report high levels of financial security.

This single statistic cuts through the noise of market forecasts and portfolio theories, pointing to a more fundamental human need: predictability. As millions of Baby Boomers and Gen Xers approach a retirement landscape devoid of the traditional pensions their parents enjoyed, they face what Nobel laureate Bill Sharpe famously called "the nastiest, hardest problem in finance": decumulation. The fear of outliving one's savings now eclipses the fear of death for a majority of Americans, according to an Allianz survey. October Three's report provides compelling data that the solution may lie in redesigning the very structure of retirement itself, shifting the focus from a lump sum to a lifetime stream of income.

The Psychological Toll of Financial Uncertainty

The core of the retirement crisis is as much psychological as it is financial. The October Three report found that 75% of retirees with some form of lifetime income felt financially secure, compared to just 57% of those managing their own savings. This confidence gap has profound real-world consequences. The study revealed that 60% of retirees without guaranteed income had to cut back on leisure and other discretionary spending, not necessarily due to a lack of funds, but out of a paralyzing fear of a future shortfall.

This phenomenon, known as "underspending," sees retirees living far below their means, ironically sacrificing the quality of life they saved for in order to preserve a principal they may never fully use. Research from the University of Michigan's long-running "Health and Retirement Study" corroborates the high stakes, linking financial insecurity in retirement to higher rates of depression, chronic illness, and even cognitive decline. The constant mental calculus of withdrawal rates, market volatility, and unknown longevity creates a cognitive burden that guaranteed income streams largely erase.

"For decades, the focus for American workers has been on accumulating as much money as possible for retirement," noted Idan Shlesinger, Partner and Retirement Solutions Practice Leader at October Three, in the report's release. "The problem that most now struggle with, is how to spend down these savings while ensuring it will last for their lifetime." By converting a portion of savings into a predictable monthly payment, retirees can cover essential expenses without worry, liberating them to use their remaining assets with more confidence and less anxiety. It effectively provides a personal, market-proof pension, offering the one thing a 401(k) balance cannot: peace of mind.

A Market Responds: The Rise of Hybrid Solutions

The industry is taking notice. Propelled by favorable interest rates and the demographic wave of retiring Boomers, the U.S. annuity market has seen sales exceed $1.1 trillion over the past three years, according to LIMRA. The legislative tailwinds from the SECURE Act and its 2.0 successor have further greased the wheels, making it easier for employers to incorporate lifetime income options into their 401(k) plans.

This shift is fostering a new wave of innovation aimed at bridging the gap between old-school defined benefit (DB) pensions and modern defined contribution (DC) plans. October Three is at the forefront of this movement with its O3 PRIME plan, a hybrid model that integrates a market-based cash balance plan with a standard 401(k). This structure provides employees with a projected monthly income in retirement, aiming to deliver up to 30% more lifetime income than a DC plan alone, while offering employers a risk profile similar to a 401(k).

These market-based cash balance plans, which October Three positions as a "gold standard," represent a significant design evolution. They offer the potential for higher returns than traditional fixed-rate plans while still providing a predictable income framework for the employee. By automating the creation of a lifetime income stream, such hybrid designs directly address the inertia and complexity that have historically hampered the adoption of annuities and other income solutions. They are a direct response to the report's central finding: that a system designed for income, not just accumulation, produces tangibly better outcomes for retirees.

Solving the Adoption Puzzle

Despite the clear benefits and surging sales, a significant hurdle remains: the "annuity puzzle." Academics have long noted the discrepancy between the number of people who say they value guaranteed income and the relatively few who actually purchase an annuity. A persistent knowledge gap, coupled with negative perceptions fueled by the complexity and high fees of older products, has suppressed demand.

However, the tide is turning. A 2025 Nationwide survey showed the proportion of people unaware of annuities has been cut in half in just two years. As innovative, more transparent products become embedded within employer-sponsored plans, the barriers to adoption are beginning to crumble. The Department of Labor has also provided clearer guidance, allowing certain lifetime income strategies to be included as part of a plan's Qualified Default Investment Alternative (QDIA), the default option for employees who don't actively choose their investments.

This is a critical step. By making lifetime income an automatic, opt-out feature rather than a complex, opt-in decision, plan sponsors can guide employees toward a more secure future. The data suggests employees are ready for the change, with nearly eight in ten expressing interest in having an annuity option within their workplace plan. The findings from October Three's report serve as a powerful catalyst, providing employers and their advisors with the clear evidence needed to champion a structural evolution in retirement plan design, moving from a philosophy of self-directed saving to one of guided, secure income.