Saving for retirement has become increasingly automated. For millions of Americans, money flows into a 401(k) every paycheck, investments are managed in target-date funds, and account balances grow over decades with little day-to-day decision-making.

Retirement changes everything. Instead of figuring out how to save, retirees must decide how to turn those accumulated assets into reliable income, a challenge many are unprepared to navigate.

An AARP Research study of more than 1,400 workers ages 50 to 70 finds that most have not developed a strategy to convert their nest egg into steady retirement income.

AARP’s retirement income study exposes a planning blind spot

The research, fielded in late 2025 among 1,422 adults with access to employer-sponsored retirement plans, focused on workers who are not yet retired but are approaching the transition from accumulation to decumulation.

When asked how they would prefer to draw income from their workplace savings, participants overwhelmingly favored automatic distribution, where a fixed amount is distributed on a set schedule.

Related: AARP study addresses common fear that Social Security will end

Evan Mills, an associate financial advisor at Scholar Financial Advising, warns retirees against treating savings as a single undifferentiated pool.

“The biggest mistake I usually see when working with retirees is their treating their retirement savings like one big checking account and every dollar as equally valuable,” said Mills.

About 12% said they were very likely and 49% somewhat likely to use that approach, AARP Research reported.

AARP attributed the preference for scheduled withdrawals over managed accounts or annuities to two factors: Greater control over savings and easier access to funds.

Annuity support collapses once participants learn the tradeoffs

One of the study’s findings involved how quickly enthusiasm for guaranteed income products faded once participants understood what they were agreeing to.

When participants received a general description of annuities, 18% expressed strong interest, and 41% expressed moderate interest.

Once the survey explained that payments never adjust, savings cannot be refunded, and dying early could mean getting less than you paid in, strong interest fell to 8%, and moderate interest dropped to 36%.

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TIAA Institute and Nuveen research reinforces AARP’s conclusions

A parallel study published in June 2026 by the TIAA Institute and Nuveen reached similar results using a larger, broader sample of more than 2,100 employees across all career stages.

Only 22% of respondents had given serious thought to how they would draw down their retirement accounts, the survey found.

Workers correctly answered just 25% of survey questions about withdrawal mechanics, and nearly half could not answer a single question on the topic correctly, the TIAA Institute reported.

“Yet despite that scale, too many Americans arrive at retirement without a clear strategy for turning their savings into income that will last,” Brendan McCarthy, head of Nuveen Retirement Investing, said in a statement.

Nearly half of 401(k) savers underestimate how long they will live past 65

The knowledge gap on withdrawals becomes more alarming when paired with another finding from the TIAA Institute’s research: 44% of 401(k) participants underestimate how long they are likely to live after age 65.

“You can’t solve for income that lasts a lifetime if you don’t understand how long that lifetime might be,” said Surya Kolluri, head of the TIAA Institute.

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Margie Glenn, a certified financial planner and certified public accountant at Moneta, told Yahoo Finance that the absence of a formal drawdown strategy exposes retirees to risk from both directions.

“You risk either overspending early and jeopardizing your long-term security, or fearfully underspending and failing to enjoy the retirement you sacrificed a lifetime to build,” Glenn explained.

Workers want employers to step in with retirement income guidance

Both studies point to a demand for employer action that current plan designs are not meeting, as 94% of participants in the TIAA Institute and Nuveen survey said employers need to provide resources on withdrawal decisions.

Among employees who used both interactive and non-interactive planning tools offered through their plan, 53% reported strong confidence in choosing the right withdrawal approach, nearly double the 28% rate among those who used neither type of tool, the survey showed.

Kevin Crain, executive director of the Institutional Retirement Income Council, predicted in the IRIC’s 2026 forecast that 2026 will be the year plan sponsors shift from exploring retirement income solutions to implementing them at scale.

AARP’s data signals a structural gap in how 401(k) plans serve older workers

The AARP study describes a retirement system that has succeeded at accumulation through auto-enrollment, employer matching, and diversified fund menus, but has fallen short on the phase that follows.

The decumulation side remains largely unsupported within the plans themselves, and workers approaching retirement are left to navigate that transition with limited tools and insufficient understanding of the products available to them, the report suggested.

For the millions of Americans counting on a 401(k) as their main retirement paycheck, the research points to an uncomfortable gap: The biggest financial decision of their lives is the one their plan is least built to help them make.

Related: AARP sounds alarm on key 401(k), Social Security shift