How America Retires 2025 provides a comprehensive look at the evolving defined contribution (DC) retirement landscape and the shifting needs of participants as they move from saving to spending.
Why it matters: Built on industry-wide data, the report highlights the progress made in retirement plan design, identifies gaps in decumulation support, and outlines opportunities for plan sponsors to help participants achieve more secure, confident retirements.
Executive Summary:
Core of America’s Retirement System. DC plans (i.e., 401(k) or 403(b)) cover more than 100 million workers and hold over $12 trillion in assets, far outweighing traditional pensions. Participation, contribution levels, and use of professionally managed allocations—especially target-date funds (TDFs)—are at record highs. However, as responsibility shifts from employers to individuals, retirees must manage increasingly complex financial decisions on their own.
Accumulation Is Automated—Decumulation Is Not. Automatic enrollment, auto-escalation, and TDF defaults make saving simple and effective. But there is no equivalent automated system for generating retirement income, leaving retirees to navigate individualized decisions on:
- Withdrawal strategies
- Taxes and RMDs
- Investment risk
- Health care and long-term care costs
- Social Security claiming strategies
This lack of structure contributes to uncertainty, inconsistent withdrawal patterns, and missed opportunities for sustainable income planning.
Retirees Face Multi-Dimensional Risks. According to Vanguard, retirees must manage:
- Market and sequence-of-returns risk, especially early in retirement
- Inflation risk, particularly for health-related spending
- Longevity risk, now one of the greatest threats to retirement security
Most retirees need greater guidance to balance risk, preserve assets, and maintain purchasing power over multi-decade retirements.
Many Retirees Want to Stay in Their Plan—and Plan Design Matters. Roughly half of retirees keep their assets in their DC plan during their first retirement year. Those who remain in the plan and those who roll over have similar account balances and equity exposure, indicating both groups intend to preserve assets for long-term income needs.
Crucially, flexible withdrawal options—installments and ad hoc partial withdrawals—significantly influence behavior:
- Retirees in flexible plans are 35% more likely to stay in the plan three years after retirement.
- They are 15–25% less likely to cash out in the first year.
- They tend to retain higher median balances over time.
This reinforces that modern withdrawal flexibility is central to creating retiree-friendly plans.
Many Retirees Delay Withdrawals and Need Guidance. Across a five-year sample:
- 50% of retirees took withdrawals
- 27% left assets untouched
- 23% cashed out entirely
Even among regular withdrawers, annual withdrawal amounts fluctuate significantly. Many retirees wait until RMD age to begin income withdrawals, suggesting a need for clearer, more proactive income guidance, tools, and education.
Advice and Financial Wellness Solutions Provide Meaningful Benefits. Advice significantly improves confidence—86% of advice users report higher peace of mind. Yet older, higher-balance participants are the least likely to use advice. Expanding access to low-cost advisory services, modeling tools, and retirement income calculators can help retirees better assess spending needs and manage longevity risk.
Innovation Is Increasing: Annuities and Hybrid TDFs. Plan sponsors are exploring new retirement income solutions, including:
- Access to external lifetime and period-certain annuity quotes
- Hybrid annuity TDFs, which combine the simplicity of a TDF with guaranteed lifetime income components
These products help mitigate longevity and market risk—but may reduce liquidity. Their suitability depends on plan demographics and participant preferences.
Opportunities for Plan Sponsors. The report highlights several areas where plan sponsors can meaningfully improve participant outcomes:
- Expand flexible withdrawals to support retirees who want to remain in-plan
- Enhance access to advice and retirement income planning tools
- Evaluate annuity-enabled solutions, including external marketplaces and hybrid TDFs
- Strengthen communications around income planning, portfolio construction, and retirement decisions
- Promote account consolidation to streamline households’ retirement assets
The overarching message: DC plans can and should evolve into true retirement destinations—not just savings vehicles.
Conclusion
How America Retires 2025 paints a clear picture of a retirement ecosystem undergoing profound change. While plan design advancements have made saving easier and more effective than ever, retirees need more structure, support, and confidence as they move into spending. With thoughtful plan design, stronger guidance, and expanded income solutions, plan sponsors can empower millions of Americans to achieve a more stable and sustainable retirement.
