Vanguard Research Reframes Retirement Around Sustainable Income

Brian Anderson

3 hours ago

A key insight in new research from Vanguard is that a successful retirement plan depends on an investor’s goals, how much income their savings can support, and whether that income can be sustained over time.

By shifting attention from account balances to sustainable income and personal goals, investors can gain a clearer picture of what their money can realistically support today, and in the years to come.

“Without a clear understanding of what their retirement savings can support, people often either limit spending out of fear they’ll run out of money or overspend in ways that threaten their long‑term financial security and lifestyle.”
Vanguard’s Joel Dickson

As many investors find it difficult to confidently turn retirement savings into lasting income, Vanguard today released its Principles for Retirement Income research to help address this challenge. The paper is meant to serve as a practical guide to building sustainable retirement income and helps investors tailor strategies to their unique retirement needs.

“Many investors focus on accumulating wealth but often feel less prepared to turn savings into dependable income during retirement,” said Joel Dickson, Global Head of Advised Strategies at Vanguard. “Without a clear understanding of what their retirement savings can support, people often either limit spending out of fear they’ll run out of money or overspend in ways that threaten their long‑term financial security and lifestyle. Vanguard’s Principles for Retirement Income research is designed to bring clarity and discipline to retirement income—and the spending decisions it supports.”

The research defines four tenets that together offer a simplified way to organize retirement income decisions:

Start with purpose: Define retirement priorities and goals while accounting for key risks such as inflation, market changes, and unexpected expenses.
Cover the essentials: Fund baseline needs, including housing, food, and healthcare, with reliable income sources such as Social Security, pensions, or annuities.
Make your wealth last: Extend the life of the portfolio by reducing taxes and setting a withdrawal approach that balances near-term spending with long-term goals.
Simplify: Maintain discipline and free up more time to enjoy retirement by automating tasks and revisiting your plan at the right intervals.

“The last day of work is a milestone, but retirement is a long journey shaped by decisions that evolve over time,” said Garrett Harbron, Lead Researcher and Head of Advised Wealth Management Strategies at Vanguard. “These principles offer a strong foundation, and when markets, taxes, or individual or family circumstances add complexity, a financial advisor can help investors personalize this approach and guide decision making as their needs change.”

A few other notable nuggets from the research:

• Paying for essentials (such as housing, food, transportation, health care and clothing and personal care) makes up about 85% of total annual spending for early retirees.

• Middle-income retirees typically spend about 80% of what they earned before retiring, while lower earners spend close to 96% of their pre-retirement income and higher earners spend as little as 40% of theirs.

• A withdrawal rate of 3.5% to 4% can support retirement income for 30 years or more (after Social Security and other reliable income).

• A diversified portfolio of $1 million starting at age 66, with a 6% withdrawal rate and 2% inflation, can last 20 years with median and poor market performance. If retirement lasts 30 years, however, savings may run out in either market scenario.

Vanguard’s Principles for Retirement Income was designed to complement the firm’s Principles for Investing Success, applying the same disciplined, research-led approach to the decisions investors face when paychecks end and portfolios become their primary source of support. Check out the Principles for Retirement Income research here.