More people are turning 65 this year than ever before. That has sparked a gold rush for the retirement industry

By Samantha Delouya, CNN

(CNN) — More Americans are turning 65 this year than ever before, and that number is set to creep even higher over the next few years. It’s fueling a huge rollout of new retirement products — but they’re not all golden tickets.

An average of 11,200 Americans will reach that traditional retirement age each day in 2024, according to a recent report by the Alliance for Lifetime Income.

This surge, along with new legislation that took effect recently, has led to a growing number of financial products that promise paychecks for life, no matter how long you live. But some options are difficult to reverse and, since some plans are so new, the benefits and shortfalls have not been thoroughly researched.

From pensions to 401(k) plans

Although she plans to stop working in about a decade, Jennifer Messina, a 51-year-old administrative assistant in Nutley, New Jersey, said she isn’t worried about retirement because her husband’s job affords them a union-sponsored annuity (an insurance product that pays out income) and a pension plan.

With defined benefit pensions, the burden of saving and investing for retirement falls on the employer, not on employees. These plans generally offer employees payments for life, depending on that person’s salary and how long they were with the company.

“I’m really fortunate,” Messina said. “We didn’t really save much of anything.”

However, jobs offering pension plans are harder to come by compared to previous decades. Over the past 40 years, defined contribution plans, also known as 401(k) plans, have taken their place. Americans currently hold over $7 trillion in 401(k) plans, according to data from the Investment Company Institute, a trade association.

These types of retirement plans put the job of saving and investing on the employee. With 401(k) plans, it’s up to retirees to ensure they don’t run out of money. Many people aren’t able to save adequately for retirement so that potentially leaves them heavily reliant on the Social Security benefits they accrued in their working years – and those benefits aren’t huge. The average retiree’s monthly check this year is $1,915, according to the Social Security Administration. And even retirees with the highest earnings during their careers are getting somewhere between $2,710 and $4,873 depending on the age they are when they retire.

In addition, millions of employees don’t have access to a workplace savings plan or don’t participate if they do. Nearly 50% of people don’t have any money saved in a retirement account, according to Federal Reserve data from 2022.

“It is structurally flawed,” Teresa Ghilarducci, a labor economist and professor at The New School for Social Research, said of the 401(k) system.

Financial companies are jumping in to fill the void

However, this year has brought some changes to employer-sponsored plans. A new law, known as Secure Act 2.0, allows companies to now offer their employees access to lifetime annuity products in their 401(k)s.

Enter financial companies offering new investments that echo the promise of a traditional pension: a paycheck you can count on for life.

In April, BlackRock unveiled a new fund offering called LifePath Paycheck, which is a target-date retirement fund, which invests in less risky assets the closer you get to retirement. The new twist: It comes with an option to purchase annuities recommended by BlackRock. People who are in BlackRock’s target date fund and elect to purchase an annuity through their workplace plan are not subject to the typical sales commission fees usually associated with buying an annuity. But they can only be in the fund if they have a managed account within their 401(k) plan and pay a management fee based on their assets.

Nationwide is also offering a new target-date fund with an annuity option for 401(k) participants called Income America 5ForLife, although it’s structured differently from BlackRock’s product. By being in the fund you automatically will get annuity payments in retirement and those payments will be based on 5% of your balance when you retire. The product promises to continue paying that amount, even if you outlive the account’s balance. Unlike a traditional annuity, you can pull your money out of the plan without penalty if you no longer wish to receive annuity payments.

“This is a whole new burgeoning segment,” Eric Stevenson, Nationwide’s president of retirement solutions, told CNN. “This isn’t your father’s annuity.”

What are the downsides?

Both products can be used with tax-deferred 401k savings or after-tax Roth 401(k) savings.

For now, they are only available to employees at companies that offer them and only if they have managed accounts within the workplace savings plan.

Ghilarducci cautioned that these products won’t be free. And she advised that, when possible, retirees should opt to manage their savings on their own. “Then you’re not subject to any fees and you’re not paying somebody else’s profits,” she said.

But for retirees looking for a guarantee that they won’t run out of money, some of these new offerings may be appealing.

There may be other downsides, however: As with other annuities, the monthly paychecks you get may be smaller if you elect to pass the benefit on to your spouse after you pass away, and annuities generally don’t allow payments to pass on to children without incurring an additional cost.

And annuities can be confusing to navigate — and with many it is difficult to remove your money after you’re locked in.

There’s also the issue of inflation. Annuities do not necessarily offer inflation-adjusted payments, which means the value of your guaranteed paycheck will decline over time as you get older.

In other words, it’s always buyer beware. A steady paycheck, even one that emulates a traditional pension, might not be a perfect solution. Though she said she’s not worried about her finances after retiring, Messina, the administrative assistant in New Jersey, conceded that she and her husband will likely have to downsize, even with the benefits of a pension and annuity.

“Even with the amount of money we’ll be getting, we can’t stay here in New Jersey,” she said.

Their next hurdle is deciding where to settle before they retire. Messina wants to relocate to South Carolina, while her husband wants to move to North Dakota.

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