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Over the past two decades, retirement plan sponsors have increasingly turned to automatic solutions to help employees save more for retirement. As a result, plan participation rates have increased, automatic enrollment designs are stronger, and participant portfolio construction has continued to improve with more age-appropriate asset mixes and less extreme equity allocations, according to How America Saves, Vanguard’s annual report on the retirement savings behaviors of nearly five million American workers.
“The report shows that, despite economic pressures and uncertainties, plan sponsors and participants continued to move forward in 2024,” said Lauren Valente, Managing Director of Vanguard Workplace Solutions. “Sponsors and consultants leveraged the power of automatic solutions to drive participation rates to all-time highs. Additionally, widespread adoption of professionally managed allocations helped optimize participants’ age-based equity exposure—and resulted in more disciplined investing.”
As a result, the report finds that average retirement plan participant savings rates have reached a new high, and a record 45% of participants increased their savings rate in 2024.
“Today's 401(k) plans are not just about saving; they're about building a financial future for millions of Americans. The advancements we've seen in plan design, from auto enrollment to higher default rates, make a real difference,” said Valente.
How America Saves is a detailed snapshot of the U.S. defined contribution retirement landscape that Vanguard has published for more than two decades. This year’s report reveals how improvements in plan design have led to more workers displaying strong saving and investing behaviors.
Here are some of the plan design features that have helped participants accumulate plan assets at record numbers in 2024.
Auto-enrollment
The adoption of automatic enrollment has more than tripled since year-end 2007, the first year after the Pension Protection Act took effect. At year-end 2024, 61% of Vanguard defined contribution (DC) plans had adopted automatic enrollment, including 78% with at least 1,000 participants. Also, 61% of plans now default employees at a deferral rate of 4% or higher, up from 39% of plans in 2014.
Related: ‘A year of progress’: Vanguard’s annual ‘How America Saves’ report
In 2024, 93% of auto-enrollment plans had participation rates of 80% or higher, compared with 49% of voluntary enrollment plans. One-third of voluntary enrollment plans had participation rates below 70%.
Saving rates
The average deferral rate was 7.7% in 2024, an all-time high. The median deferral rate was 6.8%. In addition, 16% of participants increased their payroll deferral percentage, while an additional 29% saw their deferral rate increase via an automatic increase feature. That’s a boost in saving rates for nearly half (45%) of all participants – an all-time high.
Plan eligibility
In 2024, a record 76% of plans – an all-time high – allowed employees to begin making voluntary contributions immediately after they joined their employer, up from 66% of plans in 2015.
Employer contributions
One-half of Vanguard plans provided only a matching contribution, while 36% provided both a matching and a nonmatching employer contribution and 10% offered only a nonmatching employer contribution. The average value of the promised match was 4.6% of pay; the median, 4.0%. Among plans with a nonmatching employer contribution, the average contribution was 5.3% of pay; the median contribution, 4.5% of pay.
Account balances
In 2024, the average account balance for Vanguard participants was $148,153; the median balance was $38,176. Vanguard participants’ average account balances increased by 10% since year-end 2023, driven by an increase in equity and bond markets and ongoing contributions over the year.
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