In-plan guaranteed lifetime income

Defined contribution plan participants can use guaranteed withdrawal benefits to guarantee income for life, protect their balances from market volatility, and maintain withdrawal flexibility. 

What’s a guaranteed withdrawal benefit?

In the past, the only way to guarantee lifelong income was to purchase a traditional annuity. But new products can provide similar guarantees while preserving investment and withdrawal flexibility. They’re called Guaranteed Withdrawal Benefits (GWBs), and they combine investments with an insurance company guarantee.

Traditional annuities are important for retirement income. Their principal advantage is that at retirement, a participant exchanges part or all of his account balance for guaranteed income for life (and the life of his or her spouse, if it’s a joint and survivor annuity). If desired, the annuity can provide that payments will go on to his beneficiaries for the specified period if the retiree dies earlier than expected (e.g., earlier than 10 or 15 years). An additional benefit is that the retiree doesn’t have to worry about market swings and investment losses or about how much he’ll get each month.

However, there can be disadvantages, too. For example, if a retiree puts all of his money in a traditional annuity, he won’t have access to it to pay for unexpected expenses, such as medical costs.

How it works

A GWB offers the positives of a traditional annuity – guaranteed income for life — but also offers some additional flexibility. And, you can offer annuities with GWBs as an investment option in a defined contribution plan. Here’s how it works. A plan participant selects the GWB product offered in the plan—usually a professionally managed investment (such as a target-date fund or a balanced fund) with an insurance company guarantee. The guarantee has three components:

  1. Downside protection against market declines
  2. Income for life
  3. Access to the market value of the participant’s account during both accumulation and decumulation/income phases

Downside protection is provided through an “Income Base.” The Income Base is a calculated number that equals the annual high-water mark of the target-date fund or balanced fund associated with the GWB. Since the Income Base cannot go down in a market downturn, a participant’s post-retirement income won’t be adversely affected by a declining market.

At retirement, the participant keeps his account balance and begins to take withdrawals. So long as he takes a fixed percentage of the Income Base (typically, at age 65, 5% per year for single life or 4.5% for joint and survivor), the guarantee remains in place, even if the investments drop because of market losses. If the retiree’s account runs out of money, the insurance company continues to pay the same amount—thus guaranteeing the retiree’s income for life. 

The participant retains control of his money and can access it and take an extra distribution at any time. The extra withdrawal reduces the base for calculating future income payments, but the guarantee remains in place — just at a reduced level.

Managing withdrawals upon retirement

Consider this example: A participant retires at age 65 with a $500,000 account balance. In the three following years, significant market declines occur, such that by the end of three years, the account balance has been cut in half, to $250,000. Even if the retiree is disciplined in taking withdrawals at a fixed percentage of his original account balance (say, 5%, or $25,000 per year), he will probably run out of money in 20 years or less.

But if the retiree has an investment with a GWB, such as the Lincoln Secured Retirement IncomeSM investment option, his income base is $500,000 at the outset. Despite the market downturn, the Income Base remains at that level. In fact, it may start to grow again, if or when the market turns around, and subsequent market gains may take the account value to over $500,000. 

The retiree can take $25,000 withdrawals each year. Because of the guarantee, he’s able to take distributions calculated on this highest income base for the rest of his life. There is a cost for the guarantee — usually less than 1% per year. In the case of the Lincoln Secured Retirement IncomeSM option in a custom target-date portfolio, the guarantee can be phased in over a designated period– (e.g., 10 years), and  the cost is incurred only on the guaranteed portion of the investment.

Help make retirement income last

An in-plan option for guaranteed retirement income can help clients to secure income for life. To find out how Lincoln Secured Retirement IncomeSM solutions can help meet your clients’ needs, call our Sales Desk at 855-533-2170 or learn more at

Lincoln Secured Retirement IncomeSM solutions are offered as a group variable annuity. Amounts contributed to the annuity contract are invested in the LVIP Global Moderate Allocation Managed Risk Fund, a fund of funds with a balanced allocation. The guarantee is provided by a contract between the client/plan sponsor and Lincoln National Life Insurance Company that provides a plan participant with guaranteed annual retirement income.


Lincoln Investment Advisors Corporation manages the LVIP Global Moderate Allocation Managed Risk Fund with consulting services from Wilshire Associates Inc. and Milliman Financial Risk Management LLC.

Lincoln Financial Group® affiliates, their distributors, and their respective employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice. Please consult your own independent advisor as to any tax, accounting, or legal statements made herein.

A group variable annuity is a long-term investment product designed particularly for retirement purposes. Group annuities contain both investment and insurance components and have fees and expenses, including administrative and advisory fees. The annuity's value fluctuates with the market value of the underlying investment option, and all assets accumulate tax-deferred. Withdrawals may carry tax consequences, including possible tax penalties.

The target date is the approximate date when investors plan to retire or start withdrawing their money. Some target-date models make no changes in asset allocation after the target date is reached; other target-date models continue to make asset allocation changes following the target date. The principal value is not guaranteed at any time, including at the target date. An asset allocation strategy doesn't guarantee performance or protect against investment losses.

Investors are advised to consider the investment objectives, risks, and charges and expenses of the group variable annuity and its underlying investment option carefully before investing. The applicable variable annuity prospectus contains this and other important information about the variable annuity and its underlying investment option. Please call 888-868-2583 for a free prospectus. Read it carefully before investing or sending money. Products and features are subject to state availability.

Lincoln Secured Retirement IncomeSM group variable annuity contracts (contract form AN-701 and state variations) are issued by The Lincoln National Life Insurance Company, Fort Wayne, IN, and distributed by Lincoln Financial Distributors, Inc., a broker-dealer. The Lincoln National Life Insurance Company does not solicit business in the state of New York, nor is it authorized to do so.

All contract guarantees, including those for guaranteed income, or annuity payout rates, are subject to the claims paying ability of the issuing insurance company. They are not backed by the broker-dealer or insurance agency from which this annuity is purchased, or any affiliates of those entities other than the issuing company affiliates, and none makes any representations or guarantees regarding the claims-paying ability of the issuer.

There is no additional tax-deferral benefit for an annuity contract purchased in an IRA or other tax-qualified plan.

This material is provided by The Lincoln National Life Insurance Company, Fort Wayne, IN, and, in New York, Lincoln Life & Annuity Company of New York, Syracuse, NY, and their applicable affiliates (collectively referred to as “Lincoln”). This material is intended for general use with the public. Lincoln does not provide investment advice, and this material is not intended to provide investment advice. Lincoln has financial interests that are served by the sale of Lincoln programs, products and services.