August 2026
For most of the past forty years, defined contribution plans have been one of the great success stories in American finance. Through automatic enrollment, automatic escalation, target-date funds, and increased participant education, millions of workers have gained access to retirement savings vehicles that previous generations never enjoyed. Yet the retirement system now faces a new challenge as participants do not retire on account balances but on income.
As traditional pensions continue to disappear and life expectancies increase, the retirement industry is recognizing that accumulating assets and generating sustainable retirement income are not the same problem. While defined contribution plans have become increasingly effective at helping participants save, many retirees remain uncertain about how to convert those savings into reliable income that can last throughout retirement. This shift represents more than the emergence of new products or investment strategies. It reflects a broader evolution in retirement philosophy, moving from accumulation-focused plan design to participant outcome-focused retirement income solutions.
The growth of defined contribution plans fundamentally changed the retirement landscape in the United States. For much of the twentieth century, retirement security was built upon employer-sponsored pensions. These defined benefit plans provided predictable lifetime income while placing investment management, funding responsibility, and longevity risk on employers.
Rising costs, regulatory complexity, and changing workforce dynamics accelerated the shift toward defined contribution plans, giving participants greater control, portability, and investment flexibility. Automatic enrollment, automatic escalation, and target-date funds increased participation, improved savings rates, and simplified investment decisions through professional diversification. As a result, defined contribution assets grew dramatically, creating one of the world's largest retirement savings systems. Throughout this period, the industry's primary objective was to help participants accumulate retirement assets, a goal that has largely been achieved.
The success of defined contribution plans also transferred substantial responsibility from employers to individuals. Participants must now determine how much to save, how to invest, when to retire, how much to withdraw, and how to ensure their assets last throughout retirement. While accumulation has become increasingly automated, the decumulation phase remains largely participant directed.
Many retirees today can expect retirement periods lasting twenty-five to thirty years or longer. As a result, participants face risks that traditional pensions were specifically designed to absorb, including longevity risk, sequence-of-return risk, inflation risk, withdrawal sustainability risk, and behavioral decision-making challenges.
Perhaps most importantly, many retirees struggle with the transition from saving to spending. During their working years, participants are conditioned to accumulate assets and monitor account balances. Upon retirement, however, success is no longer measured by portfolio growth alone. Instead, it is measured by the ability to generate sustainable income while maintaining financial confidence and flexibility. The result is a growing disconnect between retirement savings success and retirement income readiness, leaving many participants uncertain whether their accumulated balances can support their desired lifestyle throughout retirement.
The difficulty of generating retirement income is not solely an investment challenge; it is also a behavioral one. Defined contribution plans have gradually simplified saving through automatic enrollment, automatic escalation, and professionally managed investment options. Yet once participants retire, many of those guardrails disappear. Individuals are suddenly responsible for determining how much they can safely spend, how to respond to market volatility, and whether their assets will last throughout retirement. These challenges are reflected in participant behavior. According to Corebridge Financial's Decumulation Study, only 29% of pre-retirees age 55 and older have a withdrawal strategy, only 25% have matched income sources to expenses, and only 14% have developed a detailed plan for required minimum distributions, highlighting how few participants enter retirement with a structured income strategy.
Behavioral finance suggests that these decisions are among the most difficult investors face. Many retirees exhibit loss aversion, placing greater emotional weight on investment losses than on equivalent gains. During periods of market decline, participants may reduce spending dramatically or abandon long-term investment strategies at precisely the wrong time. Conversely, extended bull markets can create overconfidence and encourage withdrawal rates that ultimately prove unsustainable.
Participants also struggle with present bias and complexity avoidance. While saving can be automated, spending requires continual judgment under uncertainty. Questions such as, How much can I withdraw? Will I outlive my savings? Should I preserve assets for heirs or spend more today? Often have no clear answers, leading many retirees to either underspend out of fear or overspend without fully understanding the long-term consequences. Ironically, participants who have accumulated substantial retirement assets may still experience financial insecurity because they lack confidence in their ability to convert those assets into reliable income. This reality helps explain the growing interest in retirement income solutions. Managed payout strategies, guaranteed lifetime income products, and other decumulation frameworks are designed not only to address financial risks such as longevity and market volatility, but also to reduce the cognitive burden placed on retirees. By creating more predictable income streams, these solutions can improve spending confidence and help participants make more informed long-term financial decisions. Behavioral barriers help explain why retirement income has become one of the industry's fastest growing areas of innovation. As participants increasingly recognize the difficulty of converting accumulated savings into reliable income, demand for retirement income solutions has risen substantially. Figure 1 illustrates this shift, with a large majority of defined contribution participants expressing interest in guaranteed income products within their workplace retirement plans.
At the same time, the retirement industry has expanded the range of solutions available within defined contribution plans. Rather than relying on a single approach, providers have increasingly developed complementary strategies designed to address different aspects of retirement income planning. While these solutions vary in their structure, risk profile, and degree of income certainty, they share the common objective of helping participants convert accumulated savings into sustainable retirement income. Whether through managed payout strategies, dynamic withdrawal frameworks, guaranteed income products, or income-oriented target-date funds, the common objective is to help participants transform accumulated savings into sustainable retirement income.
Perhaps no innovation has had a greater impact on participant investing than the target-date fund. Target-date funds simplified asset allocation, improved diversification, and created an effective default investment framework for millions of participants. Their success is undeniable. Yet target-date funds were primarily designed to solve the accumulation problem. Their objective is to help participants build wealth while gradually reducing investment risk as retirement approaches. While many modern glide paths extend beyond retirement, their primary focus remains portfolio construction and risk management. Figure 2 illustrates the average broad strategic asset allocation of six leading target-date fund providers. While the glide path gradually reduces investment risk and increases fixed income exposure as participants approach retirement, its primary objective remains portfolio construction. However, at retirement participants needs transition from accumulating assets to generating sustainable income. The glide path determines how assets are invested, but it does not determine how those assets should be spent. This distinction represents the central challenge facing the next generation of defined contribution plans.
Retirement income solutions introduce a different objective. Rather than asking, “How large is the participant's account balance?” they ask, “How much sustainable income can that balance generate?” This distinction may appear subtle, but it represents a significant philosophical shift. Traditional glide path thinking emphasizes account balance growth, portfolio risk management, asset allocation efficiency, and retirement readiness. Retirement income thinking instead emphasizes income sustainability, spending confidence, longevity protection, and retirement security. The most effective retirement solutions may ultimately combine the growth potential and flexibility of traditional investments with income-oriented features designed to support spending sustainability and participant confidence throughout retirement.
The first generation of defined contribution plans solved the investment problem of retirement by focusing on asset accumulation. The next generation must solve the behavioral problem by focusing on transforming those assets into a lifetime of sustainable income. Historically, plan sponsors evaluated success through participation rates, savings rates, and account balances. Going forward, retirement income adequacy, spending sustainability, participant confidence, and retirement security may become equally important measures of success. Retirement plans are evolving from investment platforms into retirement systems.
For fiduciaries, this evolution creates both opportunity and responsibility. No single retirement income solution will fit every participant population. However, the industry is increasingly recognizing that retirement outcomes, not simply account balances, are becoming the defining measure of retirement plan success.
The retirement industry stands at an inflection point, shifting from accumulation oriented outcomes to retirement outcomes. As plan sponsors evaluate the future of their retirement programs to better align with the retirement needs their participants, there is unlikely to be a universal solution. The appropriate strategy will differ based on workforce characteristics, plan objectives, and organizational priorities. While making no changes to plan design can be a valid outcome, plan sponsors should regularly evaluate participant needs against the backdrop of industry best practices as they evolve to meet current challenges.
At DeMarche, we believe retirement income should be evaluated with the same disciplined, independent, and fiduciary-driven approach that has guided institutional investment consulting for decades. Our role is not to advocate for a particular product or provider, but to help clients objectively assess the opportunities, risks, costs, and participant implications of emerging retirement income solutions.
The next generation of defined contribution plans will be defined not simply by the assets participants accumulate, but by the financial security those assets ultimately provide. We invite plan sponsors, investment committees, and fiduciaries to begin that conversation today.
