When an employee retires, what do they do with their retirement plan assets? Recent research has indicated that more than ever, retirees remain in their plan, long after they leave their employers. This points to the need for plan sponsors to position plans in a way that benefits retirees for the long term and takes into account their changing preferences.

When a worker retires, they typically have several options on what to do with their 401k savings. They can:

• Remain in the employer's plan without initiating installment payments,
• Remain in their employer's plan while taking installment payments,
• Roll over their assets to an IRA,
• Take their account balance in cash, or
• Pursue a combination of the above strategies.

Vanguard studied retirement-age participants from 2011 to 2021 and found that most retirement-age defined contribution (DC) plan participants leave their employer's retirement plan within five years of separation from service, mostly for a rollover to an IRA. However, when plans permit flexible distributions, retirement-age participants and their assets are more likely to remain in the employer's plan.