By the end of their retirement year, over half of retirees remain in their employer’s plan, and 75% preserve their assets three years post-retirement. And retirees in plans offering flexible distribution options are 30% more likely to remain in-plan and significantly less likely to cash out their balances in the first year.
“We’re proud to launch How America Retires and provide a roadmap for building resilient, income-generating strategies that support retirees throughout the next phase of their lives.”
Lauren Valente, Vanguard Workplace Solutions
These are among the key findings of Vanguard’s inaugural How America Retires report, a companion to How America Saves, that analyzes Vanguard retirement plan data and industry trends, uncovering insights into the behaviors, decisions, and challenges faced by Americans in retirement.
As defined contribution (DC) plans continue to dominate the retirement landscape, How America Retires explores income-generation strategies in retirement and the critical role 401(k) plan design plays in shaping retiree outcomes. With more than four million Americans turning 65 this year and significant progress being made in the accumulation of retirement savings over the last several years, Vanguard says How America Retires delivers a timely assessment and roadmap for improving retirement outcomes and financial security.
“Turning savings into income is one of the most important and complex steps in retirement planning,” said Lauren Valente, Managing Director of Vanguard Workplace Solutions. “That’s why we’re proud to launch How America Retires and provide a roadmap for building resilient, income-generating strategies that support retirees throughout the next phase of their lives.”
With over 100 million Americans covered by defined contribution plans and $12 trillion in assets at stake, How America Retires provides a strategic framework for enhancing retirement planning and safeguarding financial well-being.
How America Retires also highlights emerging retirement income solutions, including hybrid annuity target-date funds (TDFs), installment payment options, and expanded access to financial wellness tools. These innovations aim to address longevity risk, market volatility, and the need for personalized advice.
The new report also found evidence of balance-driven behavior. Retirees who cash out typically hold smaller balances (~$7,000 median), while those who roll over or stay in-plan tend to have higher balances, underscoring the need for tailored income solutions.
Another key finding was that nearly 30% of retirees maintain either aggressive or conservative equity exposure, suggesting a gap in portfolio construction support.
Among other highlights in the report:
• Saving a total of 12% to 15% throughout a 35-year career, in an age-appropriate, well-diversified portfolio, when combined with Social Security, helps participants generate about 75% of their pre-retirement income in retirement.
• About 3 in 10 older investors had an extreme equity allocation in 2024, indicating a possible need for advice.
• As of year-end 2024, 68% of plans offered installment payments to their retirees, up from 58% of plans 10 years ago.
• Installments and ad hoc partial withdrawals are increasingly popular plan design features. In 2024, 68% of plan sponsors allowed participants to establish installment payments; 43% of plans permitted terminated participants to take partial ad hoc cash distributions, up from 16% in 2015.
How America Retires concludes by stressing that plan sponsors need to ensure all retirees understand their next steps—from in-plan solutions, features, and services to additional out-of-plan options.
Check out the full Vanguard How America Retires report here.
SEE ALSO:
• Participants Hit All-Time Savings High in Vanguard’s ‘How America Saves’ Report