Market Turmoil Underscores Appeal of Lifetime Income

April 10, 2025

3 min read

Christopher Nikolich| Head of Glide Path Strategies (US)—Multi-Asset Solutions

Howard Li, CFA| Senior Research Analyst—Multi-Asset Solutions

The presence of lifetime income could reinforce sound retirement-investing principles.

Markets have been wracked by a conflict between the US and its global trade partners, with daily salvoes driving large market swings and leaving many investors antsy. Anxiety has the potential to derail sound long-term investing principles, so in our view, this episode highlights how the presence of a lifetime income stream could help keep investors on track.

Anxiety over Market Upheaval Could Upend Allocations

Significant US tariffs imposed on imported goods and services have disrupted supply chains, boosted prices of goods and services, and created political and economic uncertainty. As a result, market turbulence has skyrocketed. This type of volatility can lead many investors to shift their portfolio positions, magnifying volatility and rapid swings in the values of investments such stocks, commodities, foreign currencies and bonds.

Those allocation changes could also pose risks to retirement savings, especially for those nearing and in retirement. Defined contribution (DC) plan participants need growth assets like stocks to help outpace inflation and reduce the risk of outliving their retirement savings. The trade-off is risk: these assets can slide in short-term market sell-offs.

The emotional reaction to a downturn is often to sell equities and shift money into less risky options such as bonds or cash. This decision could reduce short-term risks, but it also magnifies the long-term risk that inflation erodes the purchasing power of retirement savings. Also, less growth potential could mean running out of money in retirement.

The Cost of Stress to Participants—and Their Employers

These financial concerns can easily raise participants’ stress levels, and a healthy body of research indicates that stress can take a big toll on individuals and even their employers.

The fluctuating value of investments can create a sense of instability, leading to chronic stress.ⁱ
Employees dealing with financial stress are 15 times more likely to report poor performance at work.ⁱⁱ
60% of plan participants reduced their contribution rates during financial downturns.ⁱⁱⁱ

This adds up to a stressed workforce that’s more likely to struggle with performance, which can hurt productivity, effectiveness and the organization’s bottom line. And to top things off, participants are very likely to contribute less to their retirement plan when markets tumble, which could produce a sizable drag on long-term retirement savings.

Lifetime Income Matters to DC Plan Participants

Based on our experience in partnering with DC plan sponsors and our own insights into participant behavior and needs, much participant anxiety relates to the uncertainty around having enough income in retirement. Based on our 2025 survey results, plan participants indicate that having a steady income stream is the most important element when planning for retirement.

As we see it, that’s where lifetime income solutions can help. They offer a fixed or guaranteed income stream regardless of short-term market volatility. That could be a powerful tool in tempering the urge to flee to cash in a downturn, which hardcodes losses and takes money out of equities that could potentially benefit from a rebound.

By incorporating insurance to deliver a steady income stream, a lifetime income solution helps address the risk that participants outlive their savings. It also enables higher exposure to growth assets, which have been effective at outpacing inflation. And the presence of consistent and reliable income, in our view, makes budgeting and planning easier.

Plan Sponsors Have Income Options

We’re seeing an increasing variety of in-plan lifetime income options in the marketplace, which is good news for plan sponsors looking for solutions to meet their participants’ financial goals and needs. Broadly speaking, the options fall into two categories:

Deferred or Fixed Annuities: These contracts with insurance companies provide periodic, fixed retirement income payments for life, in exchange for a nonrefundable lump sum or series of insurance-premium payments. Participants no longer have control over their assets, as they must hand them over to insurers.

Guaranteed Lifetime Withdrawal Benefits: This type of income insurance provides guaranteed lifetime income even if a participant’s retirement account runs out of money. Participants keep control of and access to their savings, while remaining invested in growth assets.

From a big-picture perspective, we believe that bouts of market unrest—including the most recent one—illustrate the key role lifetime income options could play in DC plans. By addressing certain retirement risks, lifetime income options may help reduce participants’ stress in unfriendly markets and, in the process, help them keep their long-term investment plan on course.

i J. Smith, “Financial Stress and Its Impact on Health,” Journal of Financial Planning, no. 35(4), 45-55.
ii Salary Finance, Survey (2022).
iii Employee Benefit Research Institute, 2022 Retirement Confidence Survey.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.

About the Authors

Christopher Nikolich

Christopher Nikolich joined AB in 1994 and is the Head of Glide Path Strategies (US) in the Multi-Asset Solutions business, leading research efforts relating to effective target-date and lifetime income fund construction. He is an author of defined contribution–related research, such as Designing the Future of Target-Date Funds: A New Blueprint for Improving Retirement Outcomes and Leveling the Retirement Income Playing Field: A Comprehensive Framework for Evaluating Diverse Lifetime Income Solutions. In addition, Nikolich has authored thought leadership focused on a variety of topics, such as plan design, asset allocation and inflation. He works closely with clients in the structuring of their customized target-date and lifetime income funds. From 2002 to 2008, Nikolich worked in both New York and London as a senior portfolio manager on the Blend Strategies team, collaborating with clients on the creation and implementation of multi-asset class solutions. From 1996 to 2002, he was a portfolio manager in the Index Strategies Group, where he managed risk-controlled equity services. Nikolich holds a BA in finance from Rider University, an MBA in finance from New York University. He is a member of the Board of Trustees of Rider University, the Vice Chair of Rider University’s Investment Subcommittee and is a former member of the Executive Committee of the Defined Contribution Institutional Investment Association (DCIIA). Location: New York

Howard Li, CFA

Howard Li is a Vice President and Senior Research Analyst for AB’s Multi-Asset Solutions division. He works in the US Defined Contribution Research and Investment Management team, where he is responsible for custom glide path construction, asset allocation and portfolio management of target-date solutions for US defined contribution (DC) plans. Li works with plan sponsors to develop custom glide path strategies that are tailored to DC plan sponsors’ objectives and participants’ demographics. He joined the firm in 2006 as a quantitative research analyst. Since 2008, Li has focused his research on asset allocation and investment management of custom target-date and lifetime income strategies. He holds an MSc in computer science from Boston University and an MBA in finance and economics from Columbia Business School. Li is a CFA charterholder. Location: New York

Market Turmoil Underscores Appeal of Lifetime Income

Anxiety over Market Upheaval Could Upend Allocations

The Cost of Stress to Participants—and Their Employers

Lifetime Income Matters to DC Plan Participants

Plan Sponsors Have Income Options

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