Retirement plan participants saved at
record-high rates as 401(k) plans become financial wellness
destinations.
VALLEY
FORGE, Pa., June 24,
2024 /PRNewswire/ -- 401(k) plan participants once
again saved at historic rates in 2023, with a record-high number of
participants also increasing their savings rate. How America
Saves, Vanguard's annual report on the retirement savings
behaviors of nearly five million American workers, found that the
average participant deferral rate matched the historic high of 7.4%
in 2023. When combined with employer contributions, the average
participant total savings rate kept pace with the all-time high of
11.7% reached the prior year.
"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.
For more than two decades, How America Saves has
documented retirement plan design and its impact on American
workers' saving and investing behaviors. This year's report found
encouraging plan design trends that led to workers increasing their
savings and improving their investing behaviors.
- Automatic solutions bolster employee savings: In 2023, a
record-high 59% of plans offered automatic enrollment, which
research has shown improves participation rates. Among
auto-enrollment plans, 60% defaulted employees at a deferral rate
of 4% or higher, an all-time high. Ten years ago, only 35% of plans
defaulted employees into the plan at a rate of 4% or higher. More
participants than in any previous How America Saves report
(43%) increased their savings rate in 2023, driven in part by plan
design features like automatic annual savings increases.
- Advice becomes more accessible: The percentage of plans
offering managed account advice is at an all-time high, and more
than 3 in 4 participants now have access to advice. Additionally, a
record-high number of participants with access to advice enrolled
in the service in 2023.
- Employers make it easier for workers to invest for the
long-term: Only 1% of investors who invest exclusively in a
single target-date fund traded in 2023. A record-high 64% of all
2023 contributions went into target-date funds, which many
employers offer as an automatic or default investment
strategy.
The future of 401(k) plan design
As 401(k)
participants benefit from the impact of strong plan design features
like automatic solutions, plan sponsors continue to expand the
breadth of offerings available within retirement plans.
"The 401(k) plan is evolving, bringing together not just
retirement savings, but also broader financial wellness support for
employees," said Mr. 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."
Vanguard's financial wellness experience for retirement plan
participants includes tools for emergency savings, debt paydown,
tax-efficient savings strategies, student debt management, and
more, with additional enhancements continuously added to the
digital platform. Vanguard works closely with employers to
personalize recommendations and guidance for plan participants,
resulting in an increase in positive retirement savings actions
such as higher paycheck contributions*.
Vanguard is committed to giving people the best chance for
investment success, including through providing plan sponsors and
plan participants with leading advice and investment solutions,
world-class recordkeeping technology, and actionable, data-driven
thought leadership including How America Saves. How
America Saves provides a detailed snapshot of the U.S. defined
contribution retirement landscape and serves as an important source
of benchmarking and insights for plan sponsors and consultants.
About Vanguard
Founded in 1975, Vanguard is one of the world's leading investment
management companies. The firm offers investments, advice, and
retirement services to tens of millions of individual investors
around the globe—directly, through workplace plans, and through
financial intermediaries. Vanguard operates under a unique,
investor-owned structure where Vanguard fund shareholders own the
funds, which in turn own Vanguard. As such, Vanguard adheres to a
simple purpose: To take a stand for all investors, to treat them
fairly, and to give them the best chance for investment success.
For more information, visit vanguard.com.
All investing is subject to risk, including the possible loss of
the money you invest.
For more information about Vanguard funds, visit
institutional.vanguard.com or call 800-523-7064 to obtain a
prospectus or, if available, a summary prospectus. Investment
objectives, risks, charges, expenses, and other important
information about a fund are contained in the prospectus; read and
consider it carefully before investing.
Investments in target-date funds are subject to the risks of
their underlying funds. The year in the fund name refers to the
approximate year (the target date) when an investor in the fund
would retire and leave the work force. The fund will gradually
shift its emphasis from more aggressive investments to more
conservative ones based on its target date. An investment in target
date funds is not guaranteed at any time, including on or after the
target date.
*Source: Vanguard (2023).
Advice services are provided by Vanguard Advisers, Inc., a
registered investment advisor, or by Vanguard National Trust
Company, a federally chartered, limited-purpose trust
company.
© 2024 The Vanguard Group, Inc. All rights reserved. Vanguard
Marketing Corporation, Distributor of the Vanguard Funds.
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