‘How America Saves 2026’ Preview: Strong Market, Auto Features Power Record 401(k) Balances
More proof that automatic features in 401(k)s are working today in the form of a “preview” from Vanguard of its annual “How America Saves” report—now in its 25th year.
Data released as part of the preview show how plan design is driving outcomes in coordination with participant behavior (and a strong stock market), leading to record-high account balances at the end of 2025.
Preliminary findings from this special edition reveal that, overall, participants remained resilient and stayed focused on their long-term financial goals throughout 2025. The continued enhancements in automatic solutions and the evolution of plan designs played a pivotal role in increasing employee saving rates, and the growing adoption of professionally managed allocations has further improved participants’ age-appropriate equity exposure.
The preview of “How America Saves 2026” offers a first look at retirement plan data from nearly 5 million participants on Vanguard’s recordkeeping platform, highlighting notable trends that persisted, and reflected continued improvement, through 2025. The insights are intended to assist plan sponsors in further enhancing and refining plan design strategies.
Record account balances
The preview shows 401(k) account balance averages at Vanguard increased by 13% in 2025, driven primarily by positive market performance. Despite increased volatility in the spring, the S&P 500 ended 2025 with a gain of 16%, international equities returned 32%, and the U.S. bond market rose 7%.
The average participant account balance was $167,970 as of year-end 2025. The median balance was $44,115, a 16% increase since year-end 2024.
Auto escalation, enrollment
Vanguard data shows 71% of plans overall include auto-escalation, the highest level in years.
During 2025, 14% of participants increased their payroll deferral percentage, while 8% decreased it. An additional 31% of participants had their deferral percentage increased from an annual automatic escalation, leading to 45% of participants increasing their savings (either on their own or as part of an automatic annual increase) and matching the record high reached in 2024.
As of year-end 2025, 61% of Vanguard plans permitting employee-elective deferrals had adopted automatic enrollment. Larger plans (at least 1,000 participants) were more likely to implement automatic enrollment, with 79% using the design—a record high. Plan sponsors are using automatic enrollment to help ensure that workers start saving for retirement early.
Sixty-two percent of plans with automatic enrollment defaulted their employees into the plan at a rate of 4% or higher, a trend that has increased every year.
Professionally managed allocations
Improvements in participant investment allocations continue to be driven by the growing use of professionally managed portfolios. By the end of 2025, 69% of Vanguard participants were invested in professionally managed allocations—an all-time high and up from 67% the previous year.
Most of these investors were in a single target-date fund (61%) or balanced fund (1%), while 7% used a managed account service. The share of participants relying on these professionally managed approaches has increased by nearly 50% over the past decade. Trading activity also remained extremely low, with just 5% of non-advised participants making exchanges, suggesting most investors are maintaining a long-term, disciplined approach to retirement investing.
In terms of allocations, 79% of plan contribution dollars were invested in equities during 2025, consistent with 2024. And nearly 2 of every 3 dollars contributed were invested in target-date funds. As of year-end 2025, 82% of participants had a balanced portfolio, in line with the year before.
Participant trading remains low
The movement of account assets from one investment option to another remained low. In 2025, only 5% of participants made a participant-directed trade, matching the record low from 2024 despite sizeable market volatility in the spring of 2025.
Pure target-date fund (TDF) investors are much less likely to trade—typically four to five times less likely than other participants, a rate considerably lower than that of other investors. Pure TDF investors benefit from automatic age-appropriate equity allocations and ongoing rebalancing, and they also tend to trade far less often. The reduced trading among pure TDF investors suggests a focus on long-term growth and stability and less reactive behavior during periods of market fluctuation.
401(k) loan, hardship withdrawals
Thirteen percent of participants at Vanguard had a loan outstanding at year-end 2025, in line with 2024. Overall, hardship withdrawal activity increased modestly in 2025, with 6% of participants initiating a hardship withdrawal, up from 5% in 2024.
Vanguard’s preview said that a modest increase isn’t surprising, given that it’s now easier to request a hardship withdrawal and that automatic enrollment is helping more workers save for retirement, especially lower-income workers. And for a small subset of workers facing financial stress, hardship withdrawals may serve as a safety net that may not otherwise have been available without plan-implemented automatic solutions.
Selective SECURE 2.0 adoption
The preview notes that in addition to a few mandatory provisions, SECURE 2.0 introduced several optional provisionsfor retirement plan sponsors. Early metrics show that plan sponsors are taking a selective approach to adopting these optional provisions.
Most plans have embraced the expanded catch-up contributions, allowing individuals ages 60 to 63 to invest up to $11,250 in catch-up contributions for their retirement. When offered this option, 13% of eligible participants contributed above the standard $7,500 catch-up limit.
Meanwhile, 7% of plans have adopted automatic portability, giving separated employees a clearer way to protect, and stay connected to, their retirement assets.
Among a few of the optional distribution options, qualified disaster recovery distributions had the highest adoption, with 16% of plans offering them. Six percent of plans offered withdrawals for domestic abuse, and 4% offered emergency expense withdrawals. When available, participant use of these withdrawal options was minimal, under 0.5%.
Still room for improvement
Despite continued progress in retirement saving, Vanguard’s preview concluded that room for improvement remains. Plan sponsors that have not adopted automatic enrollment should consider implementing it, while those that have should ensure participants are on track to reach total saving rates of about 12% to 15%.
Features such as higher default contribution rates, automatic escalation, and strong employer contributions can help improve outcomes. At the same time, plan sponsors should recognize that workers face multiple financial pressures beyond retirement—including debt, healthcare costs, and emergency expenses—and can support participants by offering financial wellness resources and guidance that address these broader needs.
Check out Vanguard’s “How America Saves 2026 Preview” here.
SEE ALSO:
• 401(k), 403(b) Account Balances Hit Double-Digit Swings in 2025
• Retirement Account Balances See Another Rise in Q4 2025
• SECURE 2.0 Adoption Trends: Plan Sponsors Lean Into Enhanced Catch-Up Contributions
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.