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Despite stubborn inflation, retirement plan participant outcomes thrived in 2023, bolstered by strong growth in employee contributions and adoption of automatic enrollment, according to Vanguard's 23rd edition "How America Saves" report on the retirement savings behaviors of nearly five million American workers.
"How America Saves 2024," Vanguard's 23rd edition of the annual report, details key trends surrounding retirement saving and how plan sponsors can respond to them and continue to optimize plan design to best serve plan participants.
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One key finding: 401(k) plan participants saved at historic rates in 2023, with a record-high number of participants also increasing their savings rate. Vanguard found that the average participant deferral rate reached a record-high 7.4% in 2023. When combined with employer contributions, the average participant total savings rate reached 11.7%, also an all-time high.
"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.
This year's report found encouraging plan design trends that led to workers increasing their savings and improving their investing behaviors:
Financial wellness support evolving
"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."
Vanguard's financial wellness experience for retirement plan participants includes tools for emergency savings, debt pay-down, 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*.
Related: Growth in employee 401(k) plan contributions in 2023 was 'extraordinary': Vanguard
"Modern retirement plans must accommodate a diverse array of participants," said James, "from Gen Zers, who are becoming a substantial segment of the labor market, to retirees and preretirees, who require features that can help sustain their income through their retirement years."
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
