Although employees understand that they are on a financial journey that leads to retirement, many lack a clear roadmap showing how to get there and what to do when they arrive.
"With more than $8 trillion in assets spread across 725,000 plans serving 80 million active employees, 401(k) plans are the primary employer-provided retirement savings vehicle in the private sector," said Brendan McCarthy, head of Nuveen Retirement Investing. "Yet despite that scale, too many Americans arrive at retirement without a clear strategy for turning their savings into income that will last. And that gap has real consequences for long-term financial security."
The TIAA Institute, in partnership with Nuveen, examined how 401(k) retirement savers are approaching, or failing to approach, the critical transition from saving for retirement to generating income that lasts a lifetime. Although more than 7 in 10 workers report thinking at least some about how they will withdraw money from their 401(k) in retirement, just 22% have thought about it "a lot."
The knowledge gap around the mechanics of making retirement withdrawals is particularly stark. Workers correctly answered only about one-quarter of survey questions on this topic, with nearly half failing to correctly answer a single question about retirement withdrawals. Given that withdrawal decisions are among the most consequential choices retirees face, this lack of preparation represents a significant risk to long-term financial security.
Compounding the challenge, only one-third of workers can accurately identify how long individuals typically live after reaching age 65, with 44% underestimating life expectancy. Workers who plan for a retirement that is effectively too short face a far greater risk of outliving their assets.
Workers are not simply looking for generic educational materials; they want structured, meaningful guidance from their employers. Ninety-four percent of workers say it is important for employers to provide resources to help employees determine how best to make retirement withdrawals. Nearly half go further, saying they believe it is the employer's responsibility to provide such guidance.
Among employees who used both interactive and non-interactive planning tools provided through their plan, 53% reported being very confident they will choose the best withdrawal strategy, nearly double the 28% of those who used neither type of resource who reported the same level of confidence. The quality of the employee experience matters as well. Employees who engage more deeply in planning find them more helpful, engaging and trustworthy, and are more likely to take meaningful action.
"What this research tells us is that awareness and access are the missing links," McCarthy said. "When employers invest in the right combination of interactive and educational tools, and pair them with smart plan design, including lifetime income solutions embedded in target date funds, employee confidence improves dramatically. The opportunity is clear, and the solutions exist. Employers who act on this research can make a meaningful difference in how their workforce experiences retirement."
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