5 takeaways from Vanguard's Washington insights webinar

The most prominent theme was the bipartisan push to expand access to retirement plans. While the SECURE Act and SECURE 2.0 Act strengthened the retirement system, their impact has been largely limited to workers who already have access to coverage. As Ben noted, the administration and Congress are considering several paths, including mandatory automatic enrollment, broader state-run automatic IRA programs, and even public-private approaches (for example, expanding the federal Thrift Savings Plan model). Recent proposals to expand coverage underscore the momentum.

Bottom line: Expanding access is becoming a bipartisan priority, and future legislation is likely to keep it at the center.

For the workers who do have access to retirement plans, common points of friction in the system can still erode long-term outcomes—especially during job changes. The typical worker has nine employers over the course of their career, Fiona noted.¹ When workers switch employers, they often receive about a 10% pay increase, yet their saving rate frequently drops by a full percentage point.² One reason: Moving from an autoenrollment plan with a higher default contribution rate to either a new plan that requires active enrollment or a new plan that automatically enrolls participants at a much lower rate.

Leakage is another major friction point. About 30% of workers forfeit their employer match dollars due to vesting schedules, reducing their overall savings by roughly 40%.³ Smarter plan design can help, including automatic portability to move balances seamlessly and an IRA qualified default investment alternative to keep assets invested appropriately. Importantly, research also challenges a common assumption about vesting by demonstrating that vesting doesn’t improve employee retention.⁴ This research can give plan sponsors more confidence to revisit vesting schedules without worrying about increased turnover.

The conversation about retirement plans is decisively shifting from accumulation to decumulation. As Ben put it, “We’ve done a fairly good job at getting folks to amass retirement savings during their working years, but less so on decumulation.” Too often, the system will “drop you in the Pacific Ocean and tell you you’re on your own” at retirement, Fiona said. Retiree behavior reflects that gap: About a quarter of retirees cash out their entire retirement plan balance at one time, another quarter leave assets untouched for five years, and half take withdrawals in irregular ways that may be hard to sustain.⁵

The opportunity is to deliver not only products but also integrated retirement income experiences. Vanguard Target Retirement Lifetime Income Trusts are one example: the Trusts pair the low-cost, transparent structure of a target-date strategy with an optional annuity payout through a partnership with TIAA. Participants have the option—without the obligation—to annuitize, creating a portable, professionally managed path toward dependable retirement income.

Interest in adding private assets to 401(k) plans is growing. This has been prompted, in part, by an executive order aimed at broadening access to alternative assets. The potential upside is meaningful: Allocating 10%–20% of a target-date fund to private assets can increase retirement income by an estimated 5%–15%.⁶ But as Fiona emphasized, that upside depends on several assumptions: access to top-tier managers, a long holding period (often 30–40 years), and participants’ ability to tolerate volatility and illiquidity.

In practice, the typical participant holds a target-date fund investment for only four years, driven by job changes and withdrawals.⁷ For plan sponsors, this increases the importance of due diligence: Is their workforce a good fit? And what is the right implementation: automatic enrollment that broadens access or an elective option that may limit participation but increases informed choice?

The takeaway: The opportunity is real, but it comes with real responsibility.