VALLEY FORGE, PA — Vanguard has released new research outlining a framework for turning retirement savings into sustainable income, highlighting a growing challenge for retirees as defined-contribution plans increasingly replace traditional pensions.
The investment management firm said its Principles for Retirement Income research is intended to help investors determine how much income their retirement assets can realistically support and how to sustain that income throughout retirement.
The publication addresses what many financial planners describe as the “decumulation” phase of retirement — the period when retirees shift from building wealth to drawing income from investment portfolios.
“Many investors focus on accumulating wealth but often feel less prepared to turn savings into dependable income during retirement,” Joel Dickson, Vanguard’s global head of advised strategies, said in a statement. “Without a clear understanding of what their retirement savings can support, people often either limit spending out of fear they’ll run out of money or overspend in ways that threaten their long-term financial security and lifestyle.”
The research argues that retirement planning should focus less on account balances and more on the amount of sustainable income savings can generate over time.
Vanguard’s framework is built around four principles: defining retirement goals and spending priorities, securing essential expenses through reliable income sources, implementing withdrawal strategies designed to preserve assets, and simplifying financial management through automation and periodic reviews.
The report recommends covering baseline expenses such as housing, food and healthcare through dependable income streams including Social Security benefits, pensions or annuities before relying on investment portfolios for discretionary spending.
The research also emphasizes tax management and disciplined withdrawal strategies as key factors in extending portfolio longevity, particularly as retirees face inflation, market volatility and unexpected expenses.
“The last day of work is a milestone, but retirement is a long journey shaped by decisions that evolve over time,” Garrett Harbron, Vanguard’s head of advised wealth management strategies and lead researcher on the project, said in a statement. “These principles offer a strong foundation, and when markets, taxes, or individual or family circumstances add complexity, a financial advisor can help investors personalize this approach and guide decision making as their needs change.”
The publication expands on Vanguard’s long-standing investing guidance by focusing specifically on retirement spending decisions, an area that has gained greater attention as Americans increasingly rely on personal savings and employer-sponsored retirement plans rather than guaranteed pension income.
Additional information about Vanguard’s retirement income research is available at vanguard.com.
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