Saving for retirement is a well-designed process in the United States. Many workers are enrolled in their workplace plan automatically, their contributions rise gradually and their investments are set using age-based funds.
These default processes have helped millions build meaningful savings without requiring much personal planning or risk-benefit decision-making.
Vanguard’s recent report, How America Retires 2025, highlights the benefits of this guided saving structure. It also reveals a gap. When work ends and the paycheck stops, the systems that once guided people through saving do not carry over to the spending side. There is no automatic release of funds or clear recommendations tailored to individual circumstances.
Retirees face a different set of challenges. Instead of following a built-in formula, they have to decide how to turn a retirement balance into dependable income. The report outlines the strengths of the current saving system and the uncertainties that remain once people begin drawing down their money.
What the report reveals about spending
Intuitively, spending seems a lot simpler than saving. However, that’s not the case in retirement.
The report shows that defined contribution plans now play a central role in retirement preparation. Participation rates have reached 85%, and total contributions average 12% of pay. Most workers hold at least part of their savings in professionally managed allocations, often target-date funds. These improvements stem from features that guide behavior automatically. Workers do not have to choose how much risk to take, how to rebalance their investments or when to increase their contributions.
Retirement spending looks very different from saving. Retirees must make their own decisions about how much to withdraw, which accounts to use at each stage and how to manage risk. These choices vary from one household to another. There is no standard withdrawal formula built into most plans and no automatic settings that adjust income as circumstances change.
The report also examines retiree behavior. In the year they leave employment, about half of retirees keep their assets in their workplace plan. About one quarter roll their savings into an independent IRA, and a smaller group cashes out entirely. Those who cash out generally have small balances, often less than $100,000. Over the next three years, more retirees move their money, but cash-outs remain concentrated among lower balances
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Another important finding is the inconsistency in withdrawal patterns. A large share of retirees delay taking money from their savings. Some postpone withdrawals until required distributions begin. Among those who do draw from their accounts, the timing and amounts vary sharply from year to year. This inconsistency reflects how difficult it can be to create a steady paycheck from a lump sum.
What this means for your retirement
The research points to a clear contrast. Saving behavior works smoothly because the system provides structure. Retirees are guided through enrollment, contribution increases and long-term investment decisions.
Spending behavior is less consistent as there is no typical structure. Retirees must create their own income framework and take responsibility for timing, taxes and risk. This includes managing market volatility, inflation pressure and the possibility of outliving their savings, all of which the report identifies as key challenges in retirement.
This gap affects behavior. Without clear guidance, many retirees act cautiously. Some draw too little, limiting their quality of life. Others take irregular withdrawals that may not align with their long-term needs. Poor timing during market downturns can have lasting effects on the value of a portfolio. Tax considerations become more complicated, and the sequence in which different accounts are used can influence how long savings last.
A step in the right direction
Vanguard’s research indicates that plan design changes can make the spending phase easier. More plans now offer installment payments, which allow retirees to set regular withdrawals on a schedule. Partial withdrawals, also called ad hoc distributions, have become more common. These features give retirees flexibility without requiring them to withdraw all their assets from the plan.
Plans that offer these options see different retiree behavior. Retirees with access to installment payments or partial withdrawals are more likely to remain in the plan and less likely to cash out in the first year. Their balances also tend to be higher over time. This suggests that providing retirees with practical tools to generate a regular income stream can support more stable decision-making.
New investment products are also emerging. Some target-date funds now include elements that support retirement income, although these options remain limited. Advice services and planning tools are expanding, offering retirees more ways to model future income and understand how long their savings might last.
Managing your retirement spending
The report highlights that retirees need to carefully manage their income streams and spending. Evaluating needs, understanding health and longevity risks and considering when to claim Social Security can all shape how much income is required from retirement savings.
Retirees may find it helpful to review updated thinking on withdrawal strategies, including recent commentary by Christine Benz on safe withdrawal rates and the traditional 4% rule. This reinforces the notion that one static percentage does not fit every situation.
Retirees may also need to assess whether their workplace plan or an independent IRA offers the right mix of investment choices, fees and flexibility. Those who feel uncertain may benefit from using retirement income calculators or speaking with a financial professional. The goal is not to follow a single rule but to build a framework that aligns with personal needs and risk tolerance.
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A well-designed savings system has helped millions build retirement balances. Turning those balances into a reliable income still requires careful thought. More clarity and better tools could help retirees navigate this transition with greater confidence.
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