In some ways, retirement can feel like a finish line for your employees. After saving and investing for many years, participants reach the point where they can transition from accumulating wealth to spending it. But, as plan sponsors know, retirement isn’t an endpoint; it’s a beginning.

Turning savings into a reliable, lifelong income stream is challenging, especially when there’s no one-size-fits-all product or service that can account for the specific needs of each and every participant in your plan. Not only do participants have different retirement goals—spend down their savings, grow their savings to accommodate future spending, charitable giving, bequests—they have different ways of financing those goals. Our research shows retirees draw from a variety of sources in addition to their defined contribution (DC) plan (traditional pensions, Social Security, IRAs, etc.), which need to be taken into account when building an income strategy.[1] Each retiree’s plan will look different based on their goals, appetite for risk, sources of guaranteed income, tax status of accounts, and liquidity preferences.

Of the many decisions employees need to make when entering retirement, one of the biggest is where to invest and manage their savings. Will they stay in your DC plan or will they take their assets elsewhere? Today, about 80% of DC participants decide to leave their plan within five years of retirement, either by rolling over to an IRA or cashing out.[2] At Vanguard, we believe many of these participants can be well served by staying in their plans, where they can benefit from employers’ fiduciary oversight and low-cost investments.

As more and more participants reach a traditional retirement age—about 10,000 every day[3]—plan sponsors are faced with a decision of their own: use the DC plan to help retirees manage their savings or guide them to options outside of the plan? There is no right or wrong answer here. It’s a philosophical choice every plan sponsor must make. But, for sponsors looking to help employees save and spend retirement wealth within the plan, here are five plan design options for you to consider:

  1. Remove age restrictions. Eliminate mandatory cash-out provisions for participants who reach a traditional retirement age, such as 65 or 70 ½.
  2. Consider greater withdrawal flexibility. Offer distribution options that accommodate the variable income needs of retirees. Only 13% of DC plans accommodate partial ad hoc distributions, yet those that do, retain about 50% more in retiree assets.[4]
  3. Allow for incoming rollovers. Consolidating assets helps simplify financial management for retirees and builds economies of scale for your plan.
  4. Offer investment options for retirees. Determine whether your current investment lineup meets the needs of retirees. While some individuals will have a capital preservation and income mindset, others will still be focused on growing their assets as they draw on guaranteed income sources outside your plan.
  5. Offer retirement advice and education. Retirement is complex, and your plan’s resources need to be tailored to the specific questions and concerns of individuals navigating this challenging phase of their financial life.

Creating a DC plan that serves as a destination for employees beyond their retirement milestone is not a simple decision, but it’s certainly an important one. As your participants reach the transition point from employee to retiree, they’ll look to you for guidance on how to manage their savings—just as they looked to you for help accumulating those savings. Regardless of how your plan serves retirees, our experts can provide the context and data to help inform your decisions and help your participants make the most of their retirement savings.


I’d like to thank Beth Hodge for her much-appreciated contributions to this piece.


[1] Retirement income among wealthier retirees. The Vanguard Group, Inc., 2014.

[2] Retirement distribution decisions among DC participants. The Vanguard Group, Inc., 2016,

[3] Pew Research Center. Accessed 2/7/17.

[4] Retirement distribution decisions among DC participants. The Vanguard Group, Inc., 2016,



  • All investing is subject to risk, including the possible loss of the money you invest.
  • There are important factors to consider when rolling over assets to an IRA or employer retirement plan account, or leaving assets in an employer retirement plan account. These factors include, but are not limited to, investment options in each type of account, fees and expenses, available services, potential withdrawal penalties, protection from creditors and legal judgments, required minimum distributions, and tax consequences of rolling over employer stock to an IRA.