Vanguard flags a retirement fear built into 401(k) plans

For decades, American workers have relied on their 401(k) accounts to build a retirement nest egg, using automatic contributions and employer-sponsored investment options to grow their savings over time.

But while the system makes accumulating retirement savings relatively straightforward, it offers far less guidance on turning those funds into a sustainable income that can last throughout retirement.

Vanguard’s 2026 How America Retires report examines this growing challenge, highlighting concerns for the millions of Americans approaching retirement. 

With more than 11,000 people turning 65 each day, the findings raise important questions about whether today’s retirees are adequately prepared for the financial realities that follow their final paycheck.

Also read: Vanguard drops playbook on retirement income

Vanguard’s retiree data exposes a 401(k) spending blind spot

To study retiree behavior, Vanguard’s report examined the accounts of 160,000 former employees aged 60 and older in plans with balances exceeding $100,000. 

Among that group, about 40% hold portfolios that skew either very aggressive or very conservative for their stage of life.

One-fourth had more than 80% of their balance in equities, while 16% held less than 30%, a range Vanguard flagged as potentially misaligned for most retirees. 

These retirees typically built their allocations before target-date funds (TDFs), now the default in over 90% of Vanguard plans, became widely available.

Compounding the portfolio issue, 78% of retirees aged 60 through 72 had taken no distributions from their accounts as of year-end 2025. 

Only 7% received regular installment payments, while another 15% had made occasional withdrawals, leaving the vast majority with untouched and potentially misallocated savings.

Lauren Valente, managing director of Vanguard Workplace Solutions, said the shift from accumulation to decumulation is one of the most significant financial transitions people navigate. 

Vanguard confirmed that retirees with access to flexible options like installment payments are more than 40% likely to remain in their workplace plan.

Most workers approach retirement without a withdrawal strategy

Vanguard’s data captures one corner of the problem, but other research shows the decumulation shortfall runs far deeper than portfolio positioning alone. 

Only 29% of pre-retirees aged 55 and older have a plan for how they will withdraw money in retirement, a Corebridge Financial decumulation study found.

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Greenwald Research conducted the Corebridge study among 2,210 adults aged 45 to 79 with at least $100,000 in investable assets. Among those respondents, just 14% of retirees reported having a detailed strategy for managing their required minimum distributions.

Provider-side research from IRALOGIX, based on a survey conducted in late October 2024, reinforces the scale of the problem. Peter J. de Silva, CEO of IRALOGIX, noted that 46% of those surveyed reported their 401(k) provider offered minimal or no decumulation resources.

About 49% reported forgoing a formal withdrawal strategy, opting to take what they need as expenses arise, the IRALOGIX data showed.

That instinctive approach often ignores the compounding effects of taxes, healthcare costs, and inflation over decades of retirement spending, de Silva explained.

Most Americans nearing retirement lack a clear withdrawal strategy, raising concerns about savings depletion, taxes, healthcare costs, and long-term financial security.

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A spending plan doubles retirees’ confidence, Corebridge research shows

Corebridge found that 57% of pre-retirees aged 55 and older with a decumulation plan expressed high confidence in managing their spending throughout retirement.

That figure dropped to just 26% among those without a plan, confirming that a structured withdrawal strategy can change a retiree’s outlook.

About 60% of retirees surveyed told Corebridge their assets had grown or remained stable through retirement, even as spending anxiety persisted across the group. Among that same group, 38% said they were spending less than they wanted because preserving their nest egg felt more urgent.

Terri Fiedler, president of Retirement Services at Corebridge Financial, framed the tension between lifelong saving habits and retirement reality as a systemic challenge requiring fresh approaches. 

<strong>With fewer pensions, Social Security uncertainty and people living longer, it's time to rethink how retirees transition from saving to spending</strong>.

Corebridge’s data showed the confidence gap tracked more closely with whether retirees had a formal withdrawal approach than with account size.

What the research means for 401(k) plan design and withdrawal access

Plan sponsors and recordkeepers need to improve the decumulation guidance they offer, because individual effort alone rarely closes this gap, de Silva indicated. 

Plans offering installment payouts, partial withdrawals, and other flexible distribution features are tied to more sustainable drawdowns and lower cash-out rates, Vanguard’s report showed.

Working with a financial professional was the top choice among pre-retirees surveyed, with 61% selecting it for help managing retirement spending and investments, Forbes reported. 

Valente emphasized that better education, professional advice, and improved plan design can help retirees understand their withdrawal options and spend with confidence.

The infrastructure that turned millions of Americans into disciplined savers over the past two decades has no equivalent on the spending side of retirement. Closing that gap in plan design is now among the most pressing challenges facing the 401(k) system, Valente said.

Related: Fidelity warns of 5 blind spots draining retirement savings

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