Many may find it difficult to do so. Roughly half of workers today are saving in defined contribution (DC) plans, which leave it up to the worker to convert their savings into retirement income. On top of that, the typical worker can end their career with multiple workplace and individual retirement accounts, making it hard for them to get a full picture of their retirement savings and turn those savings into income. For example, data from 22,000 retirement savers found that the median 50-to-59-year-old had three separate workplace retirement accounts, and 31% had four or more.2
What are people doing with their savings when they retire? And how can employers make their retirement plans more retiree friendly? To help answer these questions, we studied retirees' withdrawal behaviors from their total retirement wealth, including 401(k), individual retirement, and taxable accounts, over the five years after they leave an employer with a Vanguard-administered 401(k) plan.3
We found that half of retirees take withdrawals but do so irregularly. One in four do not touch their savings over the course of five years, even though they appear to have similar needs and investment horizons for their retirement assets to those who take withdrawals. The remaining 1 in 4 cash out entirely within their first year after leaving their employer. In doing so, they give up the potential for greater retirement income over the longer run.
Note: This analysis includes a sample of 70,000 workers who are 60 years or older for whom we have a bulk of their total assets across 401(k), IRA, and taxable accounts.
Source: Vanguard, 2025.
How can plan sponsors help?
1. Help retirees withdraw more consistently.
Withdrawal patterns among retirees vary widely. Among those who take withdrawals, we found that the amounts can fluctuate significantly—some withdraw nothing in certain years and large sums in others. Of retirees who began withdrawing within five years of retiring, 19% took a withdrawal in only one year, while 34% withdrew in all five years. Yet, among this consistent group, just 20% withdrew a steady 3% to 10% annually.
Large, irregular withdrawals—especially during market downturns—can undermine the long-term sustainability of retirement savings. While unexpected expenses, such as major health events, can drive up withdrawal rates, retirees are generally better served by drawing down their assets in small, consistent increments wherever possible.4
2. Enable retirees to start drawing down when ready.
One in four retirees take no withdrawals during the first five years of retirement. There are a few possible reasons for this. First, they may not need the money if their spouse is still earning an income. Second, they may wish to pass on assets to the next generation.5 And third, they may be reticent to spend down their savings or may not know how much they can spend.6
Our research shows that individuals who leave their retirement assets untouched have similar financial profiles, investment horizons, incomes, and equity allocations to those who take withdrawals. The key difference is that nonwithdrawers tend to be, on average, two years younger—suggesting they may not yet be ready or know how to begin withdrawing (Figure 2).7 Those who haven’t begun taking withdrawals could benefit from retirement income solutions that clarify how much they can safely withdraw and help them weigh the trade-offs before making a decision.
3. Nudge retirees to preserve their assets for longer.
A surprisingly large share of retirees—roughly 1 in 4—cash out the full balance of their retirement assets within one year of retiring. Figure 2 illustrates that those who cash-out have considerably lower pre-retirement incomes ($50,000) and dramatically lower retirement wealth (0.4 years' worth of income) compared with the other two groups. This is consistent with patterns among nonretirees, where cash-outs are most prevalent among those with lower balances.8
That said, not all cash-outs are for small amounts. While the typical retiree with assets in their 401(k) plan cashes out roughly $19,000, 24% of cash-outs are for balances of $50,000 or above, and 26% are for balances that represent a year's worth of income or more.9
In our sample of retirees, 65% rolled over their money to an IRA at some point during the five years, whereas 35% left their money in the 401(k) plan. Among those who left their money in the 401(k) plan, 31% cashed out in the first year, compared with just 8% among the rollover population. Conversely, 67% of retirees in the IRA population took withdrawals, compared with 45% among those in plans that permitted partial withdrawals and 31% in plans that did not.
Plan design may influence a retiree's decision to cash-out. In retirement plans where partial withdrawals are allowed, fewer participants cash-out (Figure 3).10 Although employers have been making their plans increasingly retiree friendly, among those retirees who stay in the 401(k) plan, roughly 17% are in plans that do not allow partial distributions.
Cash-outs are significantly more common among retirees in 401(k) plans that do not allow partial withdrawals. Notably, across all analyses, about 25% of retirees consistently leave their balances untouched. What varies is the proportion who cash out versus those who take incremental withdrawals. Moreover, plans with more restrictive withdrawal options tend to serve participants with lower pre-retirement incomes and smaller retirement balances.11 In other words, the plans whose participants are most at risk of cashing out often lack the flexibility needed to support gradual withdrawals. Making it easier to generate retirement income could help reduce the likelihood of full cash-outs.
Note: This analysis shows 401(k) withdrawal activities among 70,000 workers who are 60 years or older for whom we have a bulk of their total assets across 401(k), IRA, and taxable accounts.
Source: Vanguard, 2025.
Key considerations for retiree-friendly plan design
- Preserve assets: Employers can discourage cash-outs by eliminating automatic distributions for low-balance accounts and allowing terminated employees to continue repaying loans. These steps can help retirees retain more of their savings over time.
- Consolidate retirement savings: Employers can help workers consolidate their retirement assets throughout their careers so that they retire with a single, more manageable account. This includes allowing and encouraging transfers of existing retirement savings not only when employees join the company but also after they leave. Enrolling in auto portability can further support this goal by enabling account balances under $7,000 to automatically follow workers as they move between jobs.
- Generate retirement income: Employers can make it easier for retirees to turn their savings into a steady income stream. One simple way is to offer installment payment options that create a "retirement paycheck" through the plan. This approach may help prevent full cash-outs, encourage more consistent withdrawals, and give hesitant retirees the confidence to begin drawing down their assets in a sustainable way.
1 Lisa Camner McKay. Saving for Retirement in America. Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, April 14, 2025.
2 Manifest Employer Case Study. Manifest and Washington University in St. Louis, 2020.
3 Specifically, we analyzed retirement withdrawal behaviors over a five-year period among a sample of 70,000 workers who left their employer at age 60 or older between 2014 and 2018 and who had 10 years of tenure at their job or a roll-in to a Vanguard retirement account from a non-Vanguard source. The sample has a median 401(k) balance of $133,000 upon retirement and 2.2 years' worth of income in total retirement savings across 401(k), IRA, and taxable investment accounts. This is lower than, but not far off, a national benchmark of 2.9 years' worth of income in retirement savings (DC, IRA, and taxable accounts) for all Americans ages 63 to 65 who are not yet retired and hold DC plan assets. This means that we are likely seeing a substantial portion, but not all, of their retirement assets. Source: Vanguard analysis of the 2016 Survey of Consumer Finances from the Federal Reserve Board.
4 Diana Farrell and Fiona Greig. Coping with Costs: Big Data on Expense Volatility and Medical Payments. JPMorganChase Institute, 2017.
5 Even a large-bequest motive of passing on 100% of the initial portfolio value to the next generation would allow annual modest withdrawals under many market environments (Khang and Pakula, 2022).
6 Additionally, retirees may have multiple retirement savings accounts and be drawing down on a different account that we do not observe.
7 One year after retirement, equity shares are 51% for those who do nothing versus 49% for those who take withdrawals.
8 How America Saves 2024. Vanguard.
9 These shares are higher as a result of our core sample that selects for people who have long tenures or a previous roll-in to a Vanguard 401(k) or IRA account. For our original sample, 13% of cash-outs were for more than $50,000, and 14% were for more than one year's worth of income. For the IRA rollover group and restricting to the core sample, 53% of cash-outs were for more than $50,000, and 49% were for more than one year's worth of income.
10 Partial withdrawals include both non-RMD installments and partial distributions.
11 The median pre-retirement income among retirees in plans that allowed partial withdrawals was $65,000, compared with $56,000 among retirees in plans that did not allow partial withdrawals. The median years’ worth of income in retirement wealth was 1.7 years for retirees in plans that allowed partial withdrawals and 1.0 years for retirees in plans that did not allow partial withdrawals.
References:
Bengen, William P. 1994. Determining Withdrawal Rates Using Historical Data. Journal of Financial Planning 7(4): 171–180.
Clark, Jeffrey W., and Joseph C. Walsh. 2023. Retirement Distribution Decisions Among DC Participants. Vanguard.
Khang, Kevin, and David Pakula. 2022. Sustainable Withdrawal Rates in Retirement: The Importance of Customization. Vanguard.