Vanguard Develops Roadmap To Help Retirees Navigate Path To Financial Security

New Framework Guides Decision-Making on Retirement Goals, Risks, and Resources

VALLEY FORGE, PA (April 10, 2018)—Retirees face a myriad of highly personal decisions and challenging trade-offs when planning for a financially secure retirement that, for the average 65-year-old American, may last 20 years or longer. To help retirees navigate their way through retirement and create a sound financial plan, Vanguard has published Vanguard’s roadmap to financial security: A framework for decision-making in retirement.

“From constructing an investment portfolio to considering health care options, retirees face unique decisions on complex issues, which can be daunting. Our framework is both practical and prudent, giving retirees guidance and confidence in making thoughtful financial choices,” said Colleen Jaconetti, a retirement planning expert in Vanguard’s Investment Strategy Group.

The starting point in Vanguard’s simple, easy-to-understand framework is setting and prioritizing retirement goals. For most investors, goals include a combination of meeting basic living expenses, establishing a contingency reserve, accounting for discretionary expenses, and leaving a legacy. Each individual, however, will prioritize these goals differently, balancing cash flow goals of meeting immediate expenses and reserve goals, such as leaving assets to heirs.

Retirees next need to understand and address potential risks, including market risk, health risk, longevity and mortality risk, event risk, and tax and policy risk. All investors face corrections and bear markets; such large pullbacks have occurred every two years on average since 1980, according to Vanguard’s Investment Strategy Group. Inflation is also a risk, with the potential to erode a retiree’s purchasing power over time. For investors holding bonds in their portfolios, rising interest rates are another factor to consider, with the potential to decrease the value of a bond portfolio. Rising rates can also increase the cost of some annuity products.

Health risks are also a major consideration, which can vary greatly depending on genetic and lifestyle factors; the amount of available support from the government, an employer, or private insurance; and the desired level of care. Custodial care can be one of the largest expenses in retirement. According to analysis by the Center for Retirement Research, 58% of American women and 44% of American men will likely use the services of a nursing home. Cognitive decline is also an issue, as studies suggest that about half of individuals in their 80s live with some form of cognitive impairment. The type and timing of such impairment can derail goals, strain resources, and hinder sound financial decision-making.

The next step in Vanguard’s framework is a thorough evaluation of available resources, which will enable retirees to achieve their highest-priority goals while managing the accompanying risks. These can include guaranteed income such as social security or a pension plan, liquid assets, and additional resources such as work after retirement. A retiree’s goals and resources will inform an effective spending strategy, which is based on four primary levers: time horizon, asset allocation, spending flexibility, and spending sustainability.

The final step is developing a plan that accounts for competing priorities, risks, and finite resources, given a retiree’s unique circumstances. Vanguard believes a well-formulated plan, combined with ongoing oversight and evaluation, will give retirees the best chance to achieve financial security.

Vanguard’s roadmap to financial security: A framework for decision-making in retirement is available on Vanguard also offers considerable educational resources for investors accumulating assets for retirement and an array of retirement and college planning tools and calculators.

About Vanguard

Vanguard is one of the world’s largest investment management companies. As of March 31, 2018, Vanguard managed more than $5 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 395 funds to its more than 20 million investors worldwide. For more information, visit


All figures as of March 31, 2018, unless otherwise noted.

All investing is subject to risk, including possible loss of principal.