Saving for retirement comes with plenty of hand-holding. Employers often enroll new hires automatically and nudge their contributions higher each year. But once the paychecks stop, retirees are largely on their own, and new research from Vanguard suggests many of them are drifting off course.
Roughly 4 in 10 retirees hold portfolios that lean either very aggressive or very conservative for their stage of life. The finding comes from Vanguard’s 2026 How America Retires report, which examined about 160,000 former employees aged 60 and older with plan balances exceeding $100,000.
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Why so many retirees have the wrong mix is a question the report tries to answer, and the gap between where people are invested and where they should be turns out to have multiple explanations.
Why so many retirees have the wrong mix
A quarter of retirees had more than 80% of their balance in stocks, while 16% held less than 30%, a range Vanguard called “potentially misaligned for most retirees.” Wealthier savers were the most likely to swing big, with those holding at least $1 million three times more likely to keep over 80% in equities, according to Vanguard.
Tyson Sprick, a financial planner in Overland Park, Kansas, told Yahoo Finance that the data “shows how haphazard individual investors can be with their retirement account allocations” when left to their own devices. “Having a plan for decumulation is critical, and it should take shape years before actually retiring,” he said.
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Getting the mix wrong cuts both ways. Too much in stocks can do real damage if the market drops early in retirement, because the order of returns matters as much as the average.
Two retirees with the same average return can end up in very different places, with one still holding money at year 25 and the other broke by year 18. “You don’t live your life by averages. You live your life by sequences,” wrote adviser Mark Kennedy, according to Kiplinger.
Part of the problem is timing. “Many of today’s retirees may have started saving in their retirement plan prior to target-date funds being offered or serving as the investment default,” said Jeff Clark, head of defined contribution research at Vanguard. Those funds shift money from stocks toward bonds and cash as retirement nears, but many older savers have been picking their own mix for decades.
Many retirees are leaving their savings alone
Another surprise in the data is how rarely retirees touch their accounts. Among retirees aged 60 to 72, 78% had taken no distributions as of the end of 2025. Another 15% made occasional withdrawals, and only 7% received regular installment payments. Vanguard’s Lauren Valente called the move from saving to spending “one of the most significant financial transitions people navigate,” according to TheStreet.
That is not always a mistake. If you have other income, letting tax-deferred money keep growing can make sense until required minimum distributions kick in. For traditional 401(k)s, RMDs currently start at age 73, and that age rises to 75 in 2033 under the SECURE 2.0 Act, as reported by Yahoo Finance.
Waiting too long, though, can get expensive. Missing an RMD triggers a 25% excise tax on the amount that should have been withdrawn, though it can drop to 10% if the mistake is fixed within two years.
Few retirees seem ready for that step. A Corebridge Financial study found that only 14% of retirees had a detailed strategy for their required minimum distributions. Terri Fiedler, president of retirement services at Corebridge, said many people find it hard “to give themselves permission to spend the savings.”
A quarter of retirees had more than 80% of their balance in stocks, while 16% held less than 30%.Halfpoint Images / Getty Images
To roll over or stay in the plan
Many retirees later move their savings to an IRA. Staying put means you can no longer add money and you are limited to the plan’s menu of investments, while an IRA offers a wider range of choices and more control.
A rollover comes with its own trap. The money usually arrives in the IRA as cash and sits there until the owner chooses investments. Vanguard found that nearly half of rollover investors wrongly believed their money was invested automatically. “IRA cash is a billion-dollar blind spot,” said Andy Reed, Vanguard’s head of investor behavior research, according to Vanguard.
Consolidating can still bring clarity. Vanguard has warned that savings spread across several former employers’ plans make it hard to see your true asset allocation and how diversified you really are.
Employers have found a way to keep retirees in their plans. Recent retirees are more than 40% more likely to stay when flexible options such as partial and installment withdrawals are offered. About two-thirds of Vanguard-administered plans allow installment payments, but fewer than half allow spontaneous partial withdrawals.
What planners tell new retirees to do
Sprick’s advice is to pick whichever account setup is easiest to manage, whether that is the old 401(k) or an IRA. “Keep enough cash or short-term bonds so you’re not forced to sell stocks in a downturn if you need the income to live on now,” he said. “Finally, revisit your allocation periodically,” he said.
Other firms offer a similar playbook. Charles Schwab suggests keeping about a year of spending in cash after accounting for any guaranteed income such as a pension or annuity, plus two to four years in high-quality short-term bonds or bond funds.
Vanguard’s own research backs up the value of a cushion. “An emergency savings buffer can help households deal with volatility and preserve their 401(k) wealth for retirement,” said Vanguard investment strategy analyst Aaron Goodman. For retirees, that buffer may be the difference between riding out a bad market and locking in losses.
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