More people are saving for retirement, but average account balances are smaller.

Those are among the findings in in the 15th anniversary edition of “How America Saves,” Vanguard Group’s annual defined contribution report, released in tandem with the 10th anniversary of the Pension Protection Act.

“The Pension Protection Act codified many of the ‘auto pilot’ features that Vanguard and others in the industry had been advocating for in retirement plans for years,” Martha King, managing director of the Malvern, Pa.-based Vanguard’s Institutional Investor Group, says in a statement. “The improvements brought on by the industry, amplified by the PPA, has continued to bolster our defined contribution system and cements our view that 401(k) plans are a critical component to helping ensure the retirement security of millions of Americans," she said.

But all the news isn’t good. While the average account balance for Vanguard participants in 2015 was $96,288 and the median balance was $26,405, the report shows that average account balances declined by 6 percent and median account balances fell by 11 percent.

Those falling account balances can be attributed to two factors, the report says, the first of which is that the business mix is changing. In 2015, new plans converting to Vanguard had lower account balances.

The second factor is auto enrollment, which leads to more people saving, but also to more accounts with small balances — since auto enrollment tends to particularly boost participation among younger and lower-paid workers, who “tend to exhibit lower savings behaviors.” By the end of 2015, the report says, more than a third of participants joined their plan under automatic enrollment.

Target date funds are also on the rise; 90 percent of plan sponsors offered target date funds at year-end 2015, up 14 percent from year-end 2010. Nearly all Vanguard participants (98 percent) are in plans offering target date funds, and 69 percent of all participants use target date funds. Almost as many — 62 percent — of participants owning target date funds have their entire account invested in a single target date fund, while 40 percent of Vanguard participants are wholly invested in a single target date fund, either voluntarily or by default. And 99 percent of plans with auto enrollment default participants into a balanced investment strategy, with 97 percent choosing a target-date fund as the default.

The use of automatic enrollment grew by 50 percent since year-end 2010, and by the end of 2015, 41 percent of Vanguard plans adopted it; that’s up five points from 2014. Because larger plans were more likely to offer auto enrollment, 63 percent of new plan entrants in 2015 were enrolled via auto enrollment.

Slightly more than 60 percent of all contributing participants in 2015 were in plans with auto enrollment; while that feature was initially only applied to new hires, now it’s applied to eligible nonparticipants in half of Vanguard plans with the feature. Seven in 10 automatic enrollment plans have implemented automatic annual deferral rate increases.

Instant Insights /

Vanguard says plan participation is up, but balances are smaller

More From HR Executive

Related Stories

Recommended For You