T. Rowe Price flags private credit in annuities as retirees hesitate to spend

Speaking on a Goldman Sachs Asset Management panel, T. Rowe Price's Wyatt Lee said private credit is becoming a big piece of annuity holdings, and in the same week Fitch put the trailing default rate on U.S. private credit borrowers at a record 6.3%. Neither statement was offered as a forecast, but together they mark the funding side of the guaranteed-income business, where the money behind a promise of lifetime income now leans harder on a credit asset class sitting at the highest default reading the ratings firm tracks.

The demand for that promise was never the open question, since the Goldman panel was convened around a 2026 retirement survey in which 83% of respondents said they want guaranteed income—a figure large enough to explain why insurers keep expanding the product lineup and why asset managers keep positioning to supply the assets behind it. What happens after the sale is the part the week left unresolved.

Prudential's 2026 Retirement Pulse supplied the sharpest reading, and it was not the one the guaranteed-income business is built to produce. The survey found that 86% of retirees hesitate to spend their savings, and the hesitation does not fade with wealth: among respondents holding at least $500,000 in investible assets, 61% said they weren't convinced they could use their money any way they wished. Together the two figures describe retirees who have money and are not deploying it on terms they would choose for themselves.

The affluent figure deserves more weight than the headline one: a retiree with a modest balance who holds back is behaving the way the arithmetic says they should, while a retiree with half a million dollars in investible assets who still is not convinced they can use their money as they wish is describing something else, and that is the group the guaranteed-income market is built to reach.

So the week set a product against its own customer. The guarantee answers a specific fear, the fear of outliving the money, and the research arriving alongside the product suggests the fear can outlive the purchase.

Lee's remark carries the balance-sheet half of the story, and it is the half that is new. If private credit is becoming a big piece of annuity holdings, the credit quality of private-credit borrowers becomes a larger input into whether the guarantees get met, and Fitch's reading on that credit quality is the record default rate, the highest for U.S. private credit borrowers in its tracked data. Nothing in the reporting claims an insurer is close to missing a payment, and that is not the argument here; the narrower point is that the asset class increasingly supplying the guarantee is carrying more losses than at any prior reading, at the moment the guarantee is being sold to a retiree already reluctant to rely on it.

There is a reason the two trends meet on the same balance sheet: an insurer's obligation is a schedule of fixed payments, while the assets funding it are not fixed, and the more of those assets sit in private credit, the more the ability to meet the schedule turns on credit conditions rather than on the direction of interest rates alone—a different risk than the one the guarantee is sold to remove. The buyer holds a contract that pays a stated amount for life; the insurer holds the portfolio that has to fund it, and on Lee's own account that portfolio now carries a bigger private-credit position than before.

That is the ordinary shape of insurance, in which the policyholder buys the promise rather than the assets and the insurer's capital stands between the two; what the week adds is a fresh reading on how much the assets behind the promise have changed.

Lee described the allocation as growth, not as a warning, and the two firms on the panel both sit on the manufacturing side of the annuity business. The allocation trend comes from the panel; the credit trend comes from Fitch, and the two sit on the same page because the guarantee connects them, not because anyone on the panel said so.