Vanguard’s annual How America Saves report on trends in 401(K) and workplace retirement plan investing shows that investors are getting serious about saving.
One of the most notable statistics from the report is that the average deferral rate in 2024, meaning how much of an employee’s salary went to the 401(K) plan each month, was a record 7.7%.
In addition, 16% of participants increased their payroll deferral percentage, while just 8% decreased it. Further, an additional 29% saw their referral rate boosted via an automatic increase feature.
Overall, 45% of plan participants raised their savings rates in 2024 – an all-time high over the 24 years that Vanguard has conducted this survey, which pulled data from some 1,400 retirement plans serving more than 5 million participants.
“The report shows that, despite economic pressures and uncertainties, plan sponsors and participants continued to move forward in 2024,” Lauren Valente, managing director, Vanguard Workplace Solutions, said. “Sponsors and consultants leveraged the power of automatic solutions to drive participation rates to all-time highs. Additionally, widespread adoption of professionally managed allocations helped optimize participants’ age-based equity exposure—and resulted in more disciplined investing.
What Is the Average 401(k) Match?
The Vanguard report also revealed that 50% of Vanguard plans provided only a matching contribution, covering 52% of participants. Additionally, 36% of plans provided both a matching and a nonmatching employer contribution, covering 44% of participants. Further, 10% offered just a nonmatching contribution, serving 3% overall. Combined, some 96% of plans, covering 99% of participants, offered some type of match.
For context, matching contribution is when a plan matches a percentage of the employee’s contribution. The Vanguard survey found that among plans offering an employer match, 68% provided a single-tier match formula, while 25% offered multitier match formulas and 6% of plans imposed a maximum dollar cap on the employer contribution.
The most popular type of match formula, deployed by 13% of plans, was offering 50% on the first 6% of pay. Also, 10% offered 100% on the first 3% of pay, with 50% on the next 2% of pay. Further, 9% provided 100% match on the first 6% of pay, while 7% offered 100% on the first 5%, and 6% offered 100% on the first 4%.
The average match came out to 4.6% of pay, the same as 2023. But the average match has gradually climbed from 4.2% in 2015 to 4.6% now.
Also, according to Vanguard, nonmatching contributions are typically structured as a variable or fixed profit-sharing contribution or as an employee stock ownership plan (ESOP) contribution.
Participation in 401(K) and workplace retirement plans held steady at 85%, which is the same as 2023, but up from 81% in 2015. Participation has been helped over the years by the rise in plans that offer automatic enrollment. In 2024, 61% of plans offered autoenrollment, up from 59% in 2023 and just 41% in 2015.
A 13% Return in 2024
The survey found that the average account balance among those surveyed was $148,153, up 10% from the previous year.
The average return for 401(k) plan investors was 12.7% in 2024. Over the past three years, investors had an average annualized return of 5% and over the past 5 years they had an average annualized return of 8%.
Roughly 75% of overall assets were invested in equities, or stocks, with 42% in target date funds, 41% in diversified equity funds, and just 2% in company stock. Further, 3% of participants were in balanced funds, while 6% were in bond funds, and 5% were in cash.
Overall, the average plan offered 27.6 investment options. But most participants, 64%, only used one fund, while the average participant used 2.3 funds. Of the 64% only investing in one fund, 93% of them were in a single target date fund.
Also, some 67% of participants were invested in a professionally managed fund, an all-time high. Professionally managed allocations mostly refer to target-date funds, which base allocations on the expected retirement date. But they also include managed account advisory services.
The rise of target-date funds has led to less trading by participants. In 2024, only 5% of participants made a trade in their portfolio, that’s down from 10% in 2020.