Vanguard found that the average employee deferral rate was 7.4%, while the median was 6.4%. So how much are employees saving every year?Ĭertified financial planners will often recommend people start saving early in their careers, and if they can, they should set aside 12% to 15% a year of their income pre-tax.īut that is far more than many people save.
It noted that 83% of eligible employees were enrolled in their employer’s voluntary savings program last year, up 8 percentage points from a decade ago. The auto enrollment feature has helped boost overall participation in the plans Vanguard oversees. In other words, 4% of a person’s pay automatically will be taken, untaxed, and invested in their retirement savings account, where it will grow tax-deferred until it’s withdrawn in retirement.Īnd two-thirds of plans with auto enrollment also automatically increase an employee’s deferral rate annually. The most typical auto deferral rate is now set at 4% or higher. Nearly 60% of 401(k) plans now have an auto enrollment feature, meaning employees are automatically enrolled in the plan and they have to actively opt out if they decide they don’t want to save. “Among plans with a nonmatching employer contribution, the average contribution was equivalent to 5.1% of pay the median contribution, 4.1% of pay,” Vanguard noted. These often take the form of fixed- or variable-rate profit-sharing payments. How much should you have saved for retirement at your age? It's complicatedīut more than a third of employers (36%) offer not only a matching contribution but also a nonmatching contribution, meaning they put money into an account on behalf of eligible employees whether or not they are saving themselves. More than half offer a matching contribution - with the most typical match being 50 cents for every dollar an employee saves up to 6% of their pay. On the bright side, a lot of employers’ defined contribution plans now have features that make it easier for employees to save more.įor instance, Vanguard found that 95% of employers plans make contributions to their employees’ accounts. And 12% borrowed money - an average of $10,500 - from their accounts.įeatures that make building a nest egg easier Meanwhile, another 3.6% of participants made non-hardship withdrawals. Given last year’s economic headwinds, “the increase … may signal that some households faced additional financial stress,” Vanguard said, noting that about a third of hardship withdrawals were to avoid home foreclosure or eviction, and roughly another third were due to medical expenses. Vanguard found that in plans where they had the option, 2.8% of participants made hardship withdrawals, the highest since 2018. Some participants tapped their retirement savings early - either through a withdrawal or a loan. The median in some ways is a truer read on the state of employees’ retirement savings since it is the middle point - meaning half of accounts have higher balances, and half have lower ones. The numbers look worse if you consider the median balance, which was just $27,376 last year, down from $35,345 in 2021. What these 7 changes mean for you and your 401(k)
Close-up of a young woman doing her home finances in the evening Marko Geber/Digital Vision/Getty ImagesĬongress passes new retirement rules.
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