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Vanguard Introduces the How America Retires Report

Vanguard is excited to unveil its inaugural How America Retires report, a comprehensive analysis aimed at understanding the evolving dynamics of retirement in America. This report serves as a counterpart to the well-received How America Saves report and is based on extensive Vanguard retirement plan data and current industry trends. With a record number of Americans reaching retirement age this year, this newly launched report addresses critical insights concerning the behaviors, choices, and hurdles retirees face today.

As defined contribution (DC) plans continue to dominate the retirement planning landscape, the new report emphasizes the significance of effective income-generation strategies during retirement. Furthermore, it underscores the essential role of 401(k) plan design in determining favorable outcomes for retirees. With over four million Americans attaining the age of 65 this year, and notable advancements in retirement savings accumulation, this report offers vital assessments and a guideline for enhancing retirement experiences and financial security.

Importance of Transitioning from Saving to Spending

The transformation from accumulating savings to generating income is pivotal and often complex in retirement planning. Lauren Valente, Managing Director of Vanguard Workplace Solutions, noted, "Turning savings into income is one of the most important and complex steps in retirement planning. That's why we're proud to launch How America Retires and provide a roadmap for building resilient, income-generating strategies that support retirees throughout the next phase of their lives."

With more than 100 million Americans presently covered by defined contribution plans and a staggering $12 trillion in assets at stake, the report outlines a strategic framework aimed at enhancing retirement planning and safeguarding financial well-being. Here are some key findings from How America Retires:

1. Plan Design Matters: Retirees enrolled in plans offering flexible distribution options are 30% more likely to stay engaged with their plans and are significantly less likely to cash out their balances in the first year of retirement.

2. Asset Preservation Trends: By the close of the retirement year, more than half of retirees continue participating in their employer's plan, with 75% preserving their assets three years into retirement.

3. Balance-Driven Behavior: Those who choose to cash out typically possess smaller balances (around $7,000 median), while those opting for rollovers or remaining in-plan tend to have significantly higher balances, highlighting the need for tailored income solutions.

4. Portfolio Guidance Needed: Nearly 30% of retirees maintain either aggressive or conservative equity exposure, revealing a gap in the support needed for effective portfolio construction.

Commitment to Pioneering Retirement Solutions

The report highlights emerging solutions for retirement income, such as hybrid annuity target-date funds (TDFs), installment payment options, and broadened access to financial wellness tools. Such innovations aim to address longevity risks, market volatility, and the necessity for personalized financial advice.

With a detailed view of plan data and trends specific to the industry, How America Retires aims to equip plan sponsors, consultants, and individual investors with the vital information needed to make informed retirement planning decisions. Those interested can access the full report and additional industry insights on Vanguard's Workplace Solutions website.

About Vanguard

Founded in 1975, Vanguard stands as a global leader in investment management. The firm provides investment options, advice, and retirement services to millions of individual investors worldwide—either directly, through workplace plans, or via financial intermediaries. Operating under an investor-owned structure, Vanguard fund shareholders own the funds, which in turn own Vanguard itself. This unique setup drives Vanguard's commitment to stand up for all investors, ensuring fair treatment and the best possible chances for investment success. For more information, visit vanguard.com.

Stay ahead in the journey to financial stability with Vanguard's How America Retires report, and explore strategies that can significantly shape your financial future.