Decumulation: Engineering a Paycheck for Life

For decades, the defined contribution (DC) system has focused almost exclusively on accumulation, how much participants save, invest, and grow their retirement assets. But as trillions of dollars now sit inside single-employer 401(k) plans, a new challenge has emerged: decumulation.

How do we help participants convert those assets into sustainable, reliable income in retirement?

From Account Balance to Income Stream

Accumulation-centric plans often leave participants with a lump sum at retirement, no clear guidance on withdrawal strategy, and no protection against longevity risk. The shift toward outcomes-based plan design, delivering income, not just savings, has become a top priority for plan sponsors and recordkeepers alike.

To address this, the industry is leaning into three pillars:

  1. Investment Products with Income Generation Objectives

    • Target-date funds with embedded drawdown glide paths
    • Managed payout funds that auto-distribute monthly income
    • Multi-asset income portfolios designed for post-retirement stability

  2. Insurance Solutions

    • In-plan annuities: Qualified longevity annuity contracts (QLACs), guaranteed minimum withdrawal benefit (GMWB) structures
    • Deferred income annuities (DIAs): Providing predictable payments starting at a specified future date
    • Guaranteed lifetime withdrawal benefits: Blending investment growth with guaranteed income features

  3. Technology Platforms and UX Enhancements

    • Retirement income calculators with real-time projections
    • Personalized dashboards showing “paycheck equivalents” instead of account balances
    • Robo-managed drawdown solutions that adjust based on market performance and life expectancy

Why It’s Complex, and Why It Matters

Unlike accumulation, decumulation introduces sequence-of-returns risk, longevity risk, and behavioral biases that can derail even well-funded plans. Participants routinely:

  • Withdraw too much, too early
  • Fail to plan for late-life healthcare expenses
  • Ignore inflation-adjusted income needs

And plan sponsors? They’re caught in the middle, tasked with offering tools to support retirement readiness while managing fiduciary risk and evolving compliance standards (e.g., SECURE Act 2.0’s push toward lifetime income disclosure).

Asteri’s Role: Plan Design with Outcomes in Mind

At The Asteri Collective, we build plans that consider decumulation from day one.

Whether partnering with recordkeepers to integrate income-focused investment menus or advising employers on plan features like installment payout options, annuity access, or Roth-to-Traditional conversion strategies, our consultants take a lifecycle approach to plan design.

We don’t just optimize for contributions. We optimize for outcomes.

This includes:

  • Structuring plans to accommodate in-retirement drawdown flexibility
  • Coordinating with advisors on participant education and income modeling
  • Ensuring operational readiness for in-plan annuity rollouts or hybrid solutions

Looking Ahead

Decumulation will define the next decade of DC innovation. Employers who fail to adapt risk leaving participants adrift at the moment it matters most. Those who evolve will offer something far more valuable than a retirement plan, they’ll offer a retirement income strategy.

Let’s build plans that pay off, literally.