How America Saves: Insights from Vanguard’s Retirement Report
One of the top financial goals Americans save for is retirement.
Vanguard, one of the largest administrators of retirement accounts, helps nearly 5 million participants (i.e., employees) save through their workplace plans.
For the last 24 years, Vanguard has published its How America Saves report, offering a window into how 401(k) plans are designed, how participants behave, and what still needs improvement.
The latest edition was released last month.
Here are the key highlights from the report.
The typical person saving (or not) for retirement within a Vanguard-administered plan looks like this:
Median age is 43.
Median income of those who save within a 401(k) is $89,000.
Median income of those who don’t/can’t save within a 401(k) is $42,0001.
A typical retirement plan structure:
76% allow employees to contribute immediately within the retirement plan
65% immediately match employee contributions
96% provide employer contributions
86% offer Roth contributions
24% offer after-tax contributions1
Many employees don’t realize their employer offers a Roth option within their retirement plan.
This allows employees to pay taxes on contributions now and withdraw funds tax-free in retirement.
Financial planning experts often recommend Roth conversions for those in lower tax brackets today who expect to be in a higher tax bracket later in life.
Most retirement plans offer an average of 17 investment options1.
The average participant only uses two1.
People like simplicity.
The Automatic Trend
Auto-enrollment is now the norm.
The adoption of automatic enrollment has more than tripled since year-end 2007, the first year after the Pension Protection Act (PPA) of 2006 took effect. – Vanguard’s “How America Saves 2025”
In 2024, 61% of plans featured automatic enrollment (i.e., automatically enrolling employees into the retirement accounts unless they opted out), a steady climb from just 10% in 20061.
Plans with automatic enrollment had a 94% participation rate, compared with 64% for voluntary enrollment plans. – Vanguard’s “How America Saves 2025”
Another positive trend: automatic escalation.
About 69% of plans automatically boosted their employee contributions. For example, if you started contributing 10% of your income, the employer would move your contribution to 11% the following year.
Sixty-one percent of plans now default employees at a deferral rate of 4% or higher, up from 39% of plans in 2014. – Vanguard’s “How America Saves 2025”
Another smart feature gaining traction is the adoption of a Qualified Default Investment Alternative (QDIA).
The Basics: A QDIA is a default investment option within an employer-sponsored retirement plan, like a 401(k), that is used when employees don't make their own investment choices.
Roughly 89% of plans offer a QDIA, making it easier for hesitant participants to begin investing in a diversified investment strategy.
Savings Behavior
Participation has remained strong.
About 85% of employees participate in their employer’s retirement plan1.
Median savings rate is 6.8%, but when you include an employer’s contribution, it jumps to 11.5%1.
This is an increase of 1% over the last 5 years, a step in the right direction.
The average retirement balance is $148,153, while the median is $38,176. This means that some very big balances are skewing the average up1.
Another positive trend is that the average allocation to stocks has increased to 75%, from 72% in 20201.
Sadly, in 2005, 13% of participants had zero stock exposure. That number has dwindled to 2% as of the end of 20241.
Stocks remain one of the best ways to compound wealth over time and outpace inflation.
Emergency Fund Leaks
Hardship withdrawals have ticked higher.
The number of participants taking hardship withdrawals rose to 4.8% in 2024 from 1.7% in 20201.
This increase reflects greater financial stress among savers lacking liquid reserves; 37% can’t cover a $400 emergency1.
Loans remain stable.
About 80% of plans offer loans; ~13% of participants have outstanding loans with an average loan amount of $11,0001.
High hardship withdrawals suggest a tension between short-term needs and long-term goals.
Unfortunately, early withdrawals often result in income taxes, a 10% penalty, and undermine compound growth.
Final Thoughts
Participation, deferral rates, balances, and plan features improved year-over-year.
However, savings still fall short for many, hardship withdrawals are climbing, and financial literacy remains inconsistent.
Employers hold the leverage to close these gaps through better defaults, wellness tools, managed accounts, Roth options, and benchmarking.
Employees benefit most by embracing auto-enrollment, increasing contributions, and building emergency reserves.
Hitting retirement readiness goals still requires active design and engagement on both sides.
Keep learning. Keep growing. Keep going.
Endnotes:
1: Vanguard. How America Saves 2025. June 2025. https://institutional.vanguard.com/content/dam/inst/iig-transformation/insights/pdf/2025/has/2025_How_America_Saves.pdf
Now here’s what I’ve been reading, listening, and watching:
John D. Rockefeller (a private man who the public knows very well now) on Founders podcast
Just Keep Buying by Nick Maggiulli
The Seven Frequencies of Communication by Erwin Raphael McManus
The 5 Types of Wealth by Sahil Bloom
Children’s book (I have a 5-year old): Sleepytime by Joe Brumm (highly recommend this Bluey episode)
Here’s what I’ve been writing:
