Vanguard: Retirees Reluctant to Turn Savings into Regular Income

Studies have repeatedly found that many retirees lack plans for decumulation of their retirement savings and a recently published Vanguard research paper shows that most treat their accounts as a reserve fund, rather than a source for steady income.

According to a December 2025 survey of 1,486 mass-affluent Vanguard clients, between the ages of 60 and 80 and with between $100,000 and $1 million in retirement savings, only 8% took regular withdrawals from their retirement accounts to cover everyday spending needs. More than half, 53%, made irregular withdrawals for specific purposes, and 39% avoided withdrawals until they reached the age when they had to take required minimum distributions under federal law.

Vanguard’s paper concluded that there is “a critical need to help Americans transition more smoothly from their working years to retirement.” Retirees “need help navigating” the progession into retirement and to avoid defaulting to only making withdrawals from retirement accounts to meet RMDs. Participants need guidance and support from their plan sponsor employers and from financial professionals “through well-designed choice architecture,” to select a decumulation strategy that matches their income needs. 

Among retirees making sporadic withdrawals, 31% cited debt obligations as the primary driver for drawing funds from their retirement accounts, while 23% cited large unforeseen expenses such as medical bills and home repairs. Only 22% reported making withdrawals for discretionary spending such as vacations and just 9% reported withdrawing funds primarily for ongoing living expenses.

Vanguard’s report pointed to several considerations for plan sponsors and policymakers to address the current state of planning for decumulation:

• Help workers consolidate retirement savings;
• Allow flexible, in-plan distributions; and
• Offer choice architecture to generate income in retirement.

Specifically, the research found that of the 567 surveyed retirees who had not withdrawn from their retirement accounts, nearly half, 47%, were relying solely on Social Security to cover their overhead costs. About half (52%) of those relying primarily on Social Security said they were maintaining their lifestyle and 44% said they were either intentionally frugal or doing so to cut spending.

Vanguard also found reliance on RMDs as an unofficial spending strategy, even though RMD rules were designed to trigger federal tax payments. Among 176 survey respondents who planned to take only RMDs from their retirement accounts, 44% showed misunderstanding of the distributions’ purpose. Common misconceptions included 38% who thought they would not need more than minimum distributions, 29% who thought RMDs are government recommendations for safe withdrawals and 15% who did not realize they could withdraw more than the minimum.

At the same time, many retirees who took RMDs did not spend the money. Roughly six in 10 respondents said they reinvested some or all of their distributions into taxable accounts, and about three in 10 reported cutting spending or being intentionally frugal while reinvesting their RMDs.

Vanguard’s report argued that retirees delaying withdrawals can have tax consequences, as it could lead to higher lifetime tax bills than taking more consistent distributions throughout retirement. Using a hypothetical 63-year-old retiree with approximately $360,000 in a traditional 401(k) and annual Social Security benefits of about $34,000, Vanguard compared the approach of relying on Social Security and later RMDs with several “paycheck” options to generate regular retirement income.

In a scenario of spending just Social Security followed by RMDs, annual spending would average about $48,000 throughout retirement, although spending would remain relatively low until RMDs begin, leaving approximately $398,000 in residual wealth.

By comparison, Vanguard’s “real paycheck” approach uses systematic withdrawals to generate approximately $17,000 of annual income from retirement savings, creating roughly $51,000 in total annual income. According to the report, the strategy preserves about $204,000 in remaining assets in a typical scenario while producing lower lifetime taxes than the RMD-focused approach.

A “partial annuity paycheck” approach would provide slightly higher annual income ($52,000) but would reduce remaining assets to $160,000. Finally, Social Security bridge paychecks, which rely heavily on savings early in retirement to delay Social Security claiming, would provide the highest average annual income $56,000 but leave the smallest amount of assets remaining $44,000.

“The American retirement system has succeeded in helping workers build wealth,” the report stated in its conclusion. “The next frontier is helping retirees use it.”