Tens of millions of Americans are reaching retirement age without a coherent strategy for converting their 401(k) savings into a reliable income stream. A recent survey by the TIAA Institute and Nuveen, which polled over 2,100 401(k) workers, revealed significant gaps in withdrawal knowledge and planning. While 71% of respondents claim to think about how they will draw down their retirement funds, only 22% have given the question serious thought. On average, workers answered only about 25% of survey questions correctly regarding withdrawal mechanics, and nearly half could not answer a single question correctly.
Surya Kolluri, head of the TIAA Institute, highlighted a critical connection between longevity literacy and lifetime income planning. Nearly half of 401(k) employees underestimate how long they are likely to live after age 65, which directly impedes their ability to plan for sustainable income. Only a third of participants could accurately estimate typical post-65 life expectancy, with 44% underestimating it. This misperception puts them at a higher risk of outliving their savings.
Employers have a crucial role to play in addressing this issue. The research indicates that 94% of employees believe it's important for employers to provide resources for navigating withdrawal decisions, and 49% view it as their employer's actual responsibility. When employers offer a combination of interactive and educational tools, along with smart plan design that includes embedded lifetime income solutions, employee confidence in choosing withdrawal approaches significantly improves. For instance, 53% of employees who used both interactive and non-interactive tools felt very confident, compared to just 28% of those who used neither. Nuveen, for example, offers tools and investment options like target-date funds with TIAA guaranteed income to help address this problem.
Brendan McCarthy, head of Nuveen Retirement Investing, emphasized that despite the 401(k) system holding over $8 trillion in assets across 725,000 plans and serving 80 million active employees, too many Americans lack a clear strategy for turning savings into lasting income. He stressed that employer action is key to making a meaningful difference in how their workforce experiences retirement. The TIAA Institute plans to extend this research to employees in nonprofit sector defined contribution plans later this year.
