Are DC Plans Failing Retired Participants?

David Blanchett

Defined contribution plans have become the primary vehicle for retirement savings in the U.S., fundamentally reshaping how individuals prepare for their financial future. The industry has made significant strides in helping participants accumulate wealth; however, a critical question remains: Are these plans adequately equipped to help participants through retirement?

At PGIM, our 2025 DC Plan Sponsor Landscape Survey suggests that a disconnect remains. While plan sponsors acknowledged the growing importance of supporting retirees, the tools, solutions and structural features necessary for effective decumulation of assets accumulated in defined contribution plans are conspicuously absent. The data pointed to a system that excels at building nest eggs, but falls short when it comes time to draw from them, leaving many retirees to navigate complex financial decisions alone.

The survey, which polled 302 DC plan decisionmakers, revealed a significant gap between intent and action. An overwhelming 81% of sponsors agreed that providing suitable investment options and support for retired participants is increasingly vital.

Yet a closer look at plan offerings tells a different story. The availability of tools to guide retirees through the decumulation phase is alarmingly low. While 58% of plans reported offering tools to help determine effective investment strategies, far fewer said they provide support for the practical realities of retirement spending. Only 48% said they offer tools to help retirees calculate prudent annual spending levels, and a mere 20% reported providing access to a Social Security claiming tool—a crucial component of a holistic retirement income strategy. This scarcity of guidance creates a formidable barrier for participants who might otherwise choose to keep their assets within the plan, forcing them to seek solutions elsewhere.

When we examined the retirement income solutions available within plans, the findings were equally concerning. The most commonly cited solution, offered by 64% of plans, was the income fund within a target-date-fund series. While TDFs are a cornerstone of accumulation, their effectiveness as a stand-alone retirement income solution is a matter of debate. Following TDFs were stable value funds (53%) and long-duration fixed-income offerings (51%).

The data also suggested that many plan sponsors may not have a full grasp of the solutions available. For example, our own separate research suggests that long bonds were only in about 5% of 401(k) plans in 2020, and while industry surveys typically place in-plan annuity availability closer to 10%, this is well below the availability cited in the survey (51%). Additionally, the availability of annuities tracked by the survey was well above industry statistics: While approximately one-third of respondents suggested they offer some type of annuities, industry statistics suggest that actual availability is much lower (closer to 10%). These discrepancies suggest that plan fiduciaries may not have a firm grasp on the options available in their DC plan and it may actually offer less than they think it does.

According to respondents, only 34% of surveyed plans allow participants to take regular, automated withdrawals. This operational hurdle is a major impediment for retired participants who may want to leave the money in the plan. Even among the largest plans (with more than $100 million in assets), the availability of this feature only rises to 38%.

Further complicating the picture are the mixed signals plan sponsors send about whether they want participants to remain in the plan after retirement. Our survey found a striking lack of consensus: 35% of sponsors preferred participants to stay, 26% preferred them to roll their assets out, and a significant 39% reported no preference at all. While other surveys suggest interest in keeping participants in the plan has been increasing, ambiguity still exists.

Among plans that do wish to keep participants, common tactics include offering retirement planning services and targeted communications. However, without the requisite tools and withdrawal options, these efforts may not be enough to make staying in the plan a compelling choice.

The evidence from our survey presents a clear call to action. For DC plans to fulfill their promise of providing lifelong financial security, a paradigm shift is necessary. The industry’s focus must expand from simply helping participants get to retirement to expertly guiding them through it. This requires a deliberate and strategic integration of decumulation-focused tools, a clearer understanding and offering of genuine income solutions, and the universal implementation of practical features like systematic withdrawals.

Without these foundational changes, DC plans will continue to succeed at helping Americans accumulate wealth but fail them at the critical moment when they need to turn that wealth into sustainable, lifelong income.

David Blanchett is head of retirement research at Prudential Financial and a portfolio manager at PGIM.

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of ISS STOXX or its affiliates.