401(k)s Help Workers Save. Can They Also Help Them Spend in Retirement?

When United Technologies began winding down its traditional pension more than a decade ago, executives knew the company needed to find a new way to set future generations of retirees up for financial success.

Employees would become increasingly responsible for funding their own retirements through their 401(k) accounts, but what would happen after their careers ended? Features existed to make savings easier, but turning those savings into a reliable paycheck in retirement was more complicated.

So in 2012, the company—now RTX Corp.—introduced a guaranteed lifetime income strategy inside its defined contribution plan, designed to establish monthly income retirees could not outlive without forcing participants to surrender control of their retirement assets through annuitization.

“We needed a solution going forward to provide the best features of a pension through the defined contribution plan,” says Ken Levine, RTX’s head of retirement strategy, who is now transitioning into retirement.

The effort required years of coordination among human resources, legal, outside consultants and investment partners to create something that could provide a modern-day pension.

More than a decade later, RTX continues to refine its program. In 2023, it allowed participants to choose their target retirement age for planning purposes, rather than assuming everyone would retire at 65. More recently, the company expanded targeted communications encouraging eligible retirees to activate their guaranteed income benefit after leaving the workforce—efforts Levine says have increased adoption.

For instance, as of June 30, RTX’s Lifetime Income Strategy held approximately 13% of plan assets—$9.5 billion—out of the RTX Savings Plan’s total of $72.3 billion. Additionally, RTX’s 220,000 plan participants include 90,000 former employees who decided to leave their money in the plan.

A Broader Transformation

RTX’s experience reflects a broader transformation underway across the retirement industry. Hands-off solutions have made retirement saving simpler, such as automatic enrollment, automatic escalation and target-date funds that automatically adjust risk based on participants’ age. But those tools accumulate savings, rather than helping a retiree spend through retirement.

“There really isn’t an ‘auto-retire’ solution,” says Jeff Clark, head of defined contribution research at Vanguard.

An average of about 11,200 Americans per day will turn 65 from 2024 through 2027, what retirement researchers call “Peak 65.” Simplifying the spend-down phase has therefore become increasingly top-of-mind for plan sponsors and providers.

That is because nearly all of the Peak 65ers face a similar choice: whether to leave their savings in their final employer’s retirement plan, where they built their nest egg; to roll it into an individual retirement account; to cash out entirely; or to use it to buy an annuity or other income product.

For years, 401(k) plans were engineered almost entirely around accumulation, with automated features helping to generate high balances for any worker who contributed consistently. What happened when the worker retired essentially became their own problem.

That is starting to change, but slowly and unevenly, exposing a wide gap between what retirees say they want and what plan sponsors have actually built.

Demand, Implementation

In surveys conducted by the TIAA Institute and Nuveen in 2025, 93% of 401(k) participants said it was important that their plan offer a way to convert savings into guaranteed monthly income in retirement, and 87% said employers bear some responsibility for retirement income security, up sharply from 60% just a few years earlier. Yet a separate PGIM survey of 155 plan sponsors found that only 7% had implemented, or were implementing, a retirement income solution, and other industry surveys frequently show implementation lagging a perceived rise in participant demand.

“It’s fair to say we figured out much better the accumulation side, but the decumulation side is still very much a work in progress,” Clark says.

According to Clark, Vanguard’s data show real movement: Nearly 70% of plans now offer scheduled installment drawdown payments, up from 58% a decade ago, and 43% allow ad-hoc partial withdrawals, up from just 13% in 2014—a feature Clark calls one of the fastest-growing in the industry. Retirees in plans offering those features are roughly 20% less likely to cash out and slightly more likely to remain in the plan three years after leaving their employer, he says.

The Plan Sponsor Case for Keeping Assets In Plan

The reasons plan sponsors might want retirees to remain in plan range from economic to altruistic. Larger asset pools mean lower per-participant recordkeeping costs and more leverage to negotiate institutional pricing, the kind of scale individual retirees cannot get on their own.

Dennis Simmons, executive director of the Committee on Investment of Employee Benefit Assets, which represents large corporate and public retirement plans, says plan sponsors are increasingly viewing a 401(k) not just as an accumulation vehicle, but “as a drawdown vehicle,” though the shift is complicated by everything from recordkeeping mechanics to how income features integrate with existing advice programs.

Notably, he says fiduciary anxiety about offering in-plan annuities has faded.

“I don’t think the fiduciary concerns that were there maybe 10 years ago are the No. 1 headwind anymore,” Simmons says, crediting a safe harbor for annuity provider selection created by the Setting Every Community Up for Retirement Enhancement Act of 2019.

The bigger obstacles now, he says, are operational, such as how an income or drawdown feature is communicated, administered and folded into a plan’s broader structure. Simmons also points to renewed sponsor interest in coordinating legacy defined benefit and cash balance plans alongside 401(k)s—including using pension overfunding, with proposed guardrails, to strengthen other benefits.

Early Innings

Still, Tim Pitney, the managing director and head of lifetime income distribution at TIAA, says the industry is roughly in the “second [or] third inning” of building durable retirement income solutions, with momentum shifting away from persuading plan sponsors that they should act and shifting toward figuring out how they can do so most effectively.

TIAA, which began selling annuity-based retirement plans in 1918 for nonprofit and academic employees, has seen rapid growth in embedding annuities inside target-date-style default structures, work Pitney says now touches nearly 1,000 clients and roughly $100 billion in assets.

Pitney believes the conversation is no longer about whether to offer decumulation solutions, but about how to offer them effectively as part of a plan. The institutional pricing offered by plans should benefit participants, Pitney says, rather than facing higher costs on the retail market. According to LIMRA, retail annuity sales hit a record high in 2025, totaling $464.1 billion, due to an increase in demand as Peak 65 continues.

The financial stakes of the decision to keep money in plan are real, even when annuities are not involved. Research from the Pew Charitable Trusts found that retail mutual fund share classes typically carry fees roughly 0.34 percentage points higher than the institutional share classes common inside 401(k) plans, a gap that can compound into tens of thousands of dollars lost over a retirement, particularly since the Employee Retirement Income Security Act’s fiduciary protections do not follow a participant’s assets once they leave an employer plan.

“If you want to keep them in plan, you have to give them a reason to stay,” Pitney says.

RTX’s Levine knows firsthand the work it takes to implement drawdown retirement solutions, but he says growing legal protections and the increased certainty of the available solutions both indicate that defined contribution plans can be designed to help retirees spend down in retirement. “The old excuses of ‘nobody’s done this before’ [or] ‘we’re going to get sued’ or ‘it’s an uncertain regulatory environment’—I don’t think those excuses are there anymore,” Levine says.

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