Workers near retirement may face ‘psychological burden’ shifting from saving to spending

As employees prepare to retire, they’re likely to experience a significant mindset shift when it comes to how they manage their money.

After spending much of their career saving for retirement, they must now consider how to spend that money. These workers might not have a clear plan for how much they can safely spend in retirement while accounting for other costs, such as healthcare.

This shift can represent a “very large psychological burden” for some retirees, Jeff Clark, head of defined contribution research with recordkeeper Vanguard, said.

Recent Vanguard data shows that most defined contribution plan participants aged 60–72 aren’t touching that money, at least for now. Among this group, which included retirees that had $100,000 or more in savings, 78% had taken no distributions as of the end of 2025.

That’s likely because they didn’t need to, Clark said. These participants might be drawing from other assets, such as a prior 401(k) or taxable assets.

Once retirement plan participants hit a certain age, they’re required to take a minimum amount out of their accounts. Nevertheless, “there is still a lot of education for retirees to really understand” that they don’t need to wait until this point “to start withdrawing money from [their accounts],” Clark said.

How HR leaders can help workers better prepare for retirement. As benefits teams engage with their partners to better support workers nearing retirement, flexibility and personalization is key, sources told HR Brew.

“Retirement is so individualized,” Clark said. An employee’s spending plan can depend on a variety of factors, such as how soon they’ll take Social Security payments. If a worker is going to wait until they’re 70 to collect Social Security benefits, for example, they’ll need to be “a little bit more aggressive in how [they] use some of [their] 401(k) assets,” he said.

As Goldman Sachs thinks how to best support clients in this stage of their lives, “personalized planning for everyone, we think, will be the critical baseline for retirement users to effectively make retirement income decisions,” Marci Green, head of retirement distribution and third-party insurance with the firm, said.

In recent years, firms like Goldman have developed solutions that provide a regular income stream to plan participants once they retire. Such features are particularly attractive in a world where defined contribution plans—which don’t guarantee a regular income to participants—dominate the market.

One solution from this category that plan sponsors can consider is annuities, a contract-based agreement that lets workers convert part of their retirement earnings into a guaranteed income stream.

Increasingly, such solutions are being embedded into retirement plans, Green noted. Forty-seven percent of US insurance industry professionals said “in-plan retirement income” was a priority for their annuity efforts, according to a Goldman Sachs survey fielded in the summer.

In addition to annuities, plan sponsors can also consider adding features like installments, which establish a process for letting participants take a set amount of money from their accounts on a routine basis (unlike annuities, installments aren’t considered guaranteed income). More employers are also allowing participants to take ad hoc partial withdrawals from their plans once they’ve retired. Some 43% of plans offered this option as of 2026, up from 16% in 2015, per Vanguard.

Many of these solutions can help plan sponsors create a “paycheck effect” that mimics what employees were receiving prior to retirement, Clark said. “I think that could go a long way to making sure that a participant still feels they have the optionality.”