The retirement landscape in America is undergoing a quiet revolution, according to Vanguard’s inaugural "How America Retires" report. With over 4 million Americans turning 65 in 2025, the focus is shifting from saving to spending — and advisors are taking note.
And they aren’t alone. More than 100 million Americans participate in defined contribution (DC) retirement plans, representing approximately $12 trillion in assets. These figures underscore both the scale of retirement planning challenges and the opportunity for advisors to make a measurable impact on clients’ long-term financial security.
Plan Design Matters
One of the key takeaways from the report is the influence of plan design on retiree behavior. Retirees in plans offering flexible distribution options are 30% more likely to remain in-plan and significantly less likely to cash out their balances within the first year. Remaining in-plan provides access to professional oversight, ongoing investment guidance, and structured withdrawal options — all factors that support sustainable income generation.
Advisors are increasingly emphasizing plan design as a critical element of retirement strategy. Flexible distribution mechanisms, such as partial withdrawals or installment options, give retirees the ability to manage cash flow needs without prematurely depleting their assets. For clients, these features can mean the difference between a secure retirement and one fraught with financial uncertainty.
Preserving Assets in Retirement
Vanguard also highlights the importance of asset preservation. Over half of retirees remain in their employer’s plan by the end of their first retirement year, and 75% continue to preserve assets three years post-retirement. However, balance size plays a significant role in decisions: retirees who cash out typically have smaller balances (median ~$7,000), while those who roll over or stay in-plan hold higher balances.
For advisors, this data reinforces the need for tailored guidance. Smaller-balance clients often face the temptation to cash out, potentially undermining long-term security. Structured income strategies, partial rollovers, and in-plan withdrawal solutions can help these retirees maintain their savings while meeting immediate financial needs.
Portfolio Guidance Gap
Another notable insight from the report is that nearly 30% of retirees maintain either aggressive or conservative equity allocations, suggesting a gap in post-retirement portfolio guidance. Overly aggressive portfolios can expose retirees to market volatility at the very moment they need stable income, while overly conservative allocations may fail to generate sufficient growth to sustain withdrawals over a long retirement horizon.
Advisors play a crucial role in bridging this gap. Evaluating risk tolerance, time horizon, and income needs enables the construction of retirement portfolios that balance growth and stability. Tools such as glidepath adjustments, income layering, and strategic allocation shifts can help retirees manage both longevity and market risks.
Innovations in Retirement Income
Vanguard’s report also points to emerging solutions designed to enhance retirement income: hybrid annuity target-date funds (TDFs), installment-payment options, and advanced financial wellness tools. These products aim to address key retirement challenges, including longevity risk, market volatility, and the need for personalized advice.
Hybrid TDFs, for example, integrate lifetime income features with traditional target-date growth objectives, offering retirees both security and flexibility. Installment-payment options create predictable cash flows while keeping assets invested, and digital wellness tools allow retirees — and advisors — to model scenarios, monitor spending, and make informed adjustments.
How Advisors Are Responding
Fund flow and adoption data indicates that advisors are increasingly incorporating these retirement income solutions into client portfolios. By emphasizing flexible distribution strategies, asset preservation, and portfolio guidance, advisors can create more resilient income plans tailored to each client’s unique circumstances.
For instance, advisors may use hybrid TDFs to address both growth and longevity needs, supplement with structured withdrawals to smooth cash flow, and employ digital tools to simulate spending scenarios. This combination of innovation and individualized planning enables clients to navigate retirement with confidence rather than uncertainty.
Risks to Keep in Mind
While these strategies provide significant benefits, they are not without challenges. Early withdrawals can reduce long-term asset growth, overly complex solutions may confuse retirees, and reliance on single-product strategies can introduce concentration risk. Advisors must continue monitoring client portfolios, revising strategies as circumstances and market conditions evolve, and ensuring that retirees understand both the benefits and limitations of their income plan.
A Strategic Shift, Not Just a Tactical Fix
Is the move toward flexible, income-focused strategies a short-term response to market conditions, or a long-term evolution in retirement planning? Many advisors view it as both. Near term, these strategies help manage risks such as market volatility and cash-flow uncertainty. Long term, they represent a structural shift in retirement planning — from accumulation-centric advice to comprehensive, income-oriented guidance.
For investors seeking sustainable retirement income, integrating flexible plan options, asset-preserving strategies, innovative retirement solutions offer a clear path forward. Active management, ongoing risk monitoring, and personalized guidance remain essential to creating retirement outcomes that truly deliver confidence and security.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
Read more commentaries by VettaFi
