Americans deferred 7.4 percent of income to 401(K) plans in 2023

The average 401(k) plan participant deferred 7.4 percent in 2023, according to Vanguard’s annual report on Americans’ retirement savings behavior.

When combined with employer contributions, the average participant total savings rate was 11.7 percent.

“The 401(k) plan is evolving, bringing together not just retirement savings, but also broader financial wellness support for employees,” John James, Vanguard Institutional Investor Group managing director and head, said. “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.”

Other report findings include:

Plans offering automatic enrollment increased to a record 59 percent. Among these plans, 60 percent defaulted employees at a deferral rate of 4 percent or higher. Auto-enrollment plans improve participation rates, according to research.

Plans offering managed account advice also reached a record high in 2023. More than 75 percent of participants have access to advice.

Many employers offer target-date funds as an automatic or default investment strategy, and 64 percent of all contributions last year went into target-date funds. Only 1 percent of investors invested in a single target-date fund.

Vanguard is an investment management company that offers advice, investment, and retirement services.

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