Retirement Retirement Planning

One Big Way Your 401(k) May Be Changing in 2026

A new option is entering retirement plans — here's why it matters.

By Catherine Collins , Edited by Andrea Basse

Updated April 10, 2026

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In 2026, there are many changes on the horizon for 401(k) retirement plans. One of those changes is that many brokerage firms will begin offering annuity options within 401(k) plans. Annuities are a product that offer guaranteed income to retirees, but there are benefits and drawbacks to using them that investors need to be aware of.

Here is more information about upcoming changes to these 401(k) plans, which firms will offer them, and what employees need to consider when deciding whether or not to choose annuities as one of their retirement plan assets.

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Major brokerage firms plan to add annuity options to 401(k) accounts

Recently, Vanguard announced plans to add annuities to its target date funds in its retirement plans. Vanguard is one of the largest brokerage firms offering retirement accounts, and these new products will provide a hybrid approach where workers can allocate a portion of their 401(k) contributions to an annuity. Other firms offering similar products include BlackRock, State Street Global Advisors, and others.

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What is an annuity, and how does it work within 401(k) plans?

An annuity is different from purchasing a stock or mutual fund. An annuity is a financial contract between an investor and an insurance company. The insurance company takes either consistent monthly payments or a lump sum. Then it converts it into a stream of income that guarantees payouts to the investor in retirement.

There are many different types of annuities and annuity providers. Vanguard, for example, will add these annuities to specific target date funds. Target-date funds are unique in that they automatically adjust their allocation to become more conservative as the employee approaches retirement. With annuities automatically integrated into target date funds, part of those assets will be moved into an annuity, typically starting at age 55. By using this hybrid approach, employees will know that part of their retirement income is guaranteed, while the other part of their investments is in more traditional assets.

The benefits of investing in an annuity within a 401(k)

The biggest benefit that annuities offer is, of course, the predictability. Many people are feeling the effects of an uncertain market, especially with 2026 geopolitical issues and market fluctuations. This causes many people who are nearing retirement to worry that they won't have enough to live on. Annuities will provide a portion of guaranteed income to those who are worried about how long their retirement funds will last. With these options integrated into target date funds, they are also easier to use.

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The drawbacks to investing in an annuity within a 401(k)

Like any investment, there are also drawbacks to choosing an annuity for your retirement accounts. For example, annuities can have high fees that reduce returns. These accounts are also complex, which can be difficult to understand. Many experts caution investors against placing too much of their retirement into an annuity because of these fees and long-term costs.

Why more retirees are interested in guaranteed income options

Recent data show growing interest in guaranteed income plans for retirement. A recent survey found that 93% of 401(k) plan holders say having the option to choose guaranteed lifetime income is important. A few factors contribute to the growing interest in these plans. For example, people have longer lifespans now, fewer people have pensions, and with rising costs and inflation, many people are worried about their ability to afford their lifestyles in retirement.

Other retirement assets to consider within a 401(k) plan

Of course, an annuity is not the only option that investors have in their 401(k) plans. Many investors can choose from a variety of funds, from individual stocks to mutual funds. Current legislation underway may also allow cryptocurrency and private equity options in 401(k)s in the future, though these come with volatility risks. Ultimately, employees have several options to choose from when determining what assets to purchase within their 401(k) plans.

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How to learn more about annuity options within a 401(k) plan

The first step to learning more about annuity options within a 401(k) plan is to see whether or not your employer plans to offer these in the future. Take the time to read the fine print and understand how much your annuity costs and how much you will get in guaranteed income. Make sure to pay close attention to the fees and payout structures, and consult a financial advisor if you have any questions.

Bottom line

Most people are working towards a stress-free retirement one day, and annuities can offer a guaranteed income that helps reduce stress and worry about whether retirement funds will last. However, these funds can also come with high fees. So, the employee should carefully consider all of their options before choosing one for their 401(k).

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