Today, Vanguard published a sneak peak of its popular “How America Saves” research for 2025, which will be released in full this June.
The average 401(k) balance at Vanguard was $148,153 at the end of 2024, up 10% for the year
Participant outcomes remained strong in 2024, as plan sponsors continued to implement automatic solutions and leverage human inertia to influence decision-making. This is just one of the trends that will be chronicled in How America Saves 2025, the 24th edition of the recordkeeper’s annual analysis of retirement saving behavior.
Here are a few of the highlights from the study that Vanguard released early:
• Average 401(k) account balances hit all-time high: As equity markets increased in 2024, average participant account balances increased by 10% from year-end 2023 and reached an all-time high. The average participant account balance was $148,153 as of year-end 2024. The median balance was $38,176, an 8% increase since year-end 2023. In addition, 45% of participants increased their deferral rate (either on their own or as part of an automatic annual increase), an all-time high since Vanguard started tracking this metric in 2019.
For average account balance comparison, Fidelity recently announced that its average 401(k) balance finished 2024 at $131,700, up 11% over the course of 2024.
• Auto enrollment continues to grow: More 401(k) plans offer automatic enrollment, and more plan sponsors than ever default their participants into paycheck deferral rates of 4% or higher. As of year-end 2024, 61% of Vanguard plans permitting employee-elective deferrals had adopted automatic enrollment. Larger plans (at least 1,000 participants) were more likely to implement auto enrollment, with 78% using the design.
These metrics are all-time highs and underscore the continued momentum of plan sponsors turning to automatic enrollment. In addition, plan designs continued to improve. Sixty-one 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.
• Auto escalation boosting contributions: Nearly 7 in 10 plans with automatic enrollment had an annual escalation feature that increased their deferral percentage. Previous Vanguard research found that participants enrolled in a plan with automatic enrollment and automatic annual increases save, on average, 20% to 30% more after 3 years than participants in an automatic enrollment plan that doesn’t use automatic annual increases.
How participants manage their payroll deferral percentages significantly affects their retirement savings. During 2024, 16% of participants increased their payroll deferral percentage, while just 8% decreased it. An additional 29% of participants had their deferral percentage increased from an annual automatic escalation, leading to 45% of participants increasing their savings, the highest percentage tracked in the 25 years of How America Saves.
• Use of professionally managed allocations helping: the use of professionally managed allocations has dramatically improved participants’ age-appropriate equity exposure. From both a savings and investment perspective, thoughtful plan designs and automatic solutions have improved participant outcomes. The proportion of participants in professionally managed allocations in 2024 reached an all-time high of 67%. And only 5% of non-advised participants traded, in line with the record low in 2023.
• Loans and hardship withdrawals: The How America Saves preview revealed that loan issuances were consistent with 2023 and remained below pre-pandemic levels. While hardship withdrawals increased in 2024, the preview said it’s important to note that less than 5% of the participant population took one. Thirteen percent of participants had a loan outstanding at year-end 2024, in line with 2023. Overall, hardship withdrawal activity increased in 2024, with 4.8% of participants initiating a hardship withdrawal, up from 3.6% in 2023.
The How America Saves findings, which will be released in full this June, are intended to help plan advisors and sponsors continue to optimize their 401(k) plan design.
SEE ALSO:
• Key Role of 401(k) Auto-Enrollment, Employer Matching Highlighted in Study
• 401(k) Millionaire Ranks Grew 27% in 2024: Fidelity
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.