4 Steps to Help Pre-Retirees Consider, Plan for Retirement Income

As America’s workforce ages and defined contribution (DC) plans evolve into workers’ main retirement savings vehicle, the responsibility for converting savings into income has shifted to individuals. This transition is particularly daunting for pre-retirees — those within five to 10 years of retirement — who face complex questions about generating sustainable income, making informed decisions on claims and addressing longevity risk.

Employers and retirement service providers are uniquely positioned to guide this workforce group. By leveraging multi-channel delivery systems (i.e., web, mobile, virtual advice, call centers and in-person engagements), employers and their partners can offer personalized, timely and actionable retirement income planning support. The goal is to help pre-retirees confidently convert their savings into a paycheck for life.

This article shares four important steps organizations can take to offer employees robust income planning programs, which can significantly improve these workers’ financial well-being upon retirement.

Access a bonus Workspan Daily Plus+ article on this subject:

Employment Extenders: Why More Americans Are Delaying Retirement

Focusing on the Assets

Step 1 is to empower income generation from 401(k) plans and other assets. Elements within this step can include the following:

Defined contribution in-plan income options. Employers should improve access to DC in-plan retirement income products, including hybrid target-date funds (TDFs), hybrid managed accounts, annuities, systematic withdrawal programs and managed payout funds. Plan recordkeepers and middleware technology can support these options by integrating participant planning tools that model expected retirement income streams and emphasize tradeoffs.
Retirement income projection tools. Multi-channel platforms, especially DC plan websites and mobile apps, should prominently feature monthly retirement income projections rather than just account balances. Personalization is a crucial consideration here. Retirement plan projections should include Social Security estimates, required minimum distributions (RMDs) and drawdown assumptions.
Digital guidance and virtual advice. Digital tools can evaluate factors like longevity expectations, market volatility, Social Security election choices and healthcare costs to develop personalized withdrawal strategies. DC plan recordkeepers should incorporate virtual financial coaching or advisory services that guide pre-retirees through options for systematic withdrawals or annuitization.
Asset aggregation. To create a comprehensive retirement income picture, plan recordkeepers should enable data aggregation that allows participants to connect external individual retirement accounts (IRAs), bank accounts and brokerage assets. This aggregation can facilitate thorough income modeling and individualized withdrawal planning.

Considering Social Security

Step 2 is to review Social Security and income claiming strategies. Elements within this step can include:

Social Security election education. Delaying Social Security can significantly increase lifetime benefits. However, many pre-retirees claim early due to misinformation or immediate liquidity needs. Employers and providers can create campaigns — delivered through webinars, one-on-one sessions and personalized digital content — to demonstrate how delaying benefits until “normal retirement age” or age 70 can be supported by a 401(k) retirement income distribution strategy.
Coordinated payout strategies. Integrating Social Security election modeling with DC in-plan income planning may enable participants to effectively time distributions from their retirement accounts while deferring Social Security benefits. For instance, platforms can demonstrate how utilizing 401(k) assets from ages 62 to 70 could bridge income gaps and enhance overall financial security.

Strategizing for Withdrawals

Step 3 is to analyze withdrawal sequencing and longevity protection. Elements within this step can include:

Personalized withdrawal plans. One-size-fits-all approaches generally fail to account for individual differences in longevity, risk tolerance and goals. Plan recordkeepers should provide algorithm-based withdrawal guidance that prioritizes taxable, tax-deferred and tax-free accounts to enhance tax efficiency and prolong portfolio life.
Required minimum distributions (RMDs). Pre-retirees approaching age 73 should navigate RMD rules for retirement savings plans. Mobile and web apps for participants can proactively report upcoming RMDs and offer planning and modeling tools to assess the impact on cash flow and taxes. Withdrawal strategies should incorporate these requirements to prevent surprises.

Incorporating Myriad Channels

Step 4 is to identify key multi-channel engagement opportunities. Elements within this step can include:

Web portals. Provide 24/7 access to modeling tools, personalized income projections and interactive learning modules. Best-in-class sites integrate third-party assets, income drawdown calculators and Social Security estimators.
Mobile apps. These are ideal for concise access to information, integrating artificial intelligence (AI) to enhance personalization, drive action and provide reminders about key milestones (age 62, 65, 70), RMDs and income checkups.
Virtual advice and call centers. Human interaction is crucial for guiding important decisions. Pre-retirees benefit from personalized discussions that transform projections into actionable plans.
Email and text nudges. Automated prompts tailored to different ages and considerations of balance can boost engagement. For instance, a nudge at age 62 can encourage individuals to explore Social Security and income drawdown scenarios.
Workplace education. In-person or virtual workshops, especially in small group settings, can clarify income planning concepts and improve digital follow-up.

Beneficial Benefits

Retirement income planning is not a one-time event — it’s an evolving process that spans years before and after retirement. For pre-retirees, the need for clear guidance and integrated tools is particularly urgent. The earlier pre-retirees engage in planning and education, the more beneficial it likely becomes. Employers and retirement service providers can serve as powerful allies in this journey by offering multi-channel engagement strategies that educate, personalize and empower.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics: