Vanguard’s yearly How America Saves report highlights trends in 401(K) and workplace retirement plan investing, indicating that investors are becoming more committed to saving.
One of the standout statistics from the report is that the average deferral rate in 2024, which reflects the percentage of an employee’s salary allocated to the 401(K) plan each month, reached a record high of 7.7%.
Additionally, 16% of participants increased their payroll deferral percentage, while only 8% reduced it. Furthermore, 29% experienced an increase in their deferral rate through an automatic escalation feature.
In total, 45% of plan participants raised their savings rates in 2024—marking the highest level in the 24 years that Vanguard has conducted this survey, which gathered data from approximately 1,400 retirement plans serving over 5 million participants.
“The report indicates that, despite economic challenges and uncertainties, plan sponsors and participants continued to make progress in 2024,” said Lauren Valente, managing director of Vanguard Workplace Solutions. “Sponsors and consultants utilized the effectiveness of automatic solutions to elevate participation rates to unprecedented levels. Moreover, the widespread adoption of professionally managed allocations enhanced participants’ age-based equity exposure and fostered more disciplined investing.
What Is the Average 401(k) Match?
The Vanguard report also disclosed that 50% of Vanguard plans offered only a matching contribution, covering 52% of participants. Additionally, 36% of plans provided both matching and nonmatching employer contributions, encompassing 44% of participants. Furthermore, 10% offered solely a nonmatching contribution, serving 3% overall. In total, around 96% of plans, covering 99% of participants, provided some form of match.
For context, a matching contribution refers to when a plan matches a portion of the employee’s contribution. The Vanguard survey found that among plans offering an employer match, 68% utilized a single-tier match formula, while 25% employed multitier match formulas, and 6% of plans set a maximum dollar cap on the employer contribution.
The most common match formula, used by 13% of plans, was offering 50% on the first 6% of pay. Additionally, 10% provided 100% on the first 3% of pay, along with 50% on the next 2% of pay. Moreover, 9% offered a 100% match on the first 6% of pay, while 7% provided 100% on the first 5%, and 6% offered 100% on the first 4%.
The average match amounted to 4.6% of pay, consistent with 2023. However, the average match has gradually increased from 4.2% in 2015 to 4.6% currently.
Additionally, according to Vanguard, nonmatching contributions are typically structured as either variable or fixed profit-sharing contributions or as employee stock ownership plan (ESOP) contributions.
Participation in 401(K) and workplace retirement plans remained steady at 85%, the same as in 2023, but up from 81% in 2015. This participation rate has been bolstered over the years by the increase in plans that offer automatic enrollment. In 2024, 61% of plans provided autoenrollment, up from 59% in 2023 and just 41% in 2015.
A 13% Return in 2024
The survey revealed that the average account balance among participants was $148,153, reflecting a 10% increase from the previous year.
The average return for 401(k) plan investors was 12.7% in 2024. Over the past three years, investors experienced an average annualized return of 5%, and over the past five years, the average annualized return was 8%.
Approximately 75% of overall assets were allocated to equities, or stocks, with 42% in target date funds, 41% in diversified equity funds, and only 2% in company stock. Additionally, 3% of participants were invested in balanced funds, while 6% were in bond funds, and 5% were in cash.
On average, plans offered 27.6 investment options. However, most participants, 64%, utilized only one fund, while the average participant used 2.3 funds. Among the 64% who invested in a single fund, 93% were in a single target date fund.
Moreover, around 67% of participants were invested in a professionally managed fund, marking an all-time high. Professionally managed allocations primarily refer to target-date funds, which adjust allocations based on the anticipated retirement date, but also include managed account advisory services.
The rise of target-date funds has resulted in less trading activity among participants. In 2024, only 5% of participants made a trade in their portfolio, down from 10% in 2020.
