Vanguard Report Highlights Record Savings Rates in 401(k) Plans


VALLEY FORGE, PA — American workers continued to save at record rates in their 401(k) plans in 2023, according to Vanguard‘s annual report, “How America Saves.” The study, which analyzed the retirement savings behavior of nearly five million participants, found that the average deferral rate remained at a historic high of 7.4%. When combined with employer contributions, total savings rates matched the previous year’s all-time high of 11.7%.

“Smart plan design features are removing barriers to saving. Growth of advice and financial wellness tools are encouraging investing behaviors that lead to retirement readiness for more Americans,” said John James, managing director and head of Vanguard Institutional Investor Group.

The report highlighted several key trends driving these savings behaviors:

Automatic Enrollment Boosts Participation: In 2023, 59% of plans offered automatic enrollment, a record high. Among these plans, 60% set the default deferral rate at 4% or higher. Ten years ago, only 35% of plans had such high defaults. Additionally, 43% of participants increased their savings rate in 2023, driven by automatic annual savings increases.

Increased Access to Financial Advice: More plans than ever now offer managed account advice, with over three-quarters of participants having access to these services. A record number of participants enrolled in these advice programs in 2023.

Long-term Investment Strategies: Only 1% of investors who exclusively used a single target-date fund made trades in 2023. Target-date funds accounted for 64% of all contributions, indicating that many employers use these funds as a default investment strategy.

As 401(k) plan designs continue to evolve, Vanguard and plan sponsors are expanding features to provide comprehensive financial wellness support. “The 401(k) plan is evolving, bringing together not just retirement savings, but also broader financial wellness support for employees,” said James. “Together with plan sponsors and consultants, we are building on the strong foundation of plan design features such as auto-enrollment to better enable employees to reach their financial goals through advice and innovative technology.”

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This year’s report underscores the importance of effective plan design in helping American workers prepare for retirement.

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