Retirement plan participants saved about 11.3% of their pay on average in 2022, when considering both employee and employer contributions. That’s according to Vanguard’s How America Saves 2023 report, which tracks the saving behaviors of nearly 5 million defined contribution plan participants across Vanguard’s business.

That saving rate comes close to the 12% to 15% mark that Vanguard estimates a typical participant should target.

“Twenty percent of participants need a boost of just 1% to 3% to hit their target saving rate,” said John James, managing director of Vanguard Institutional Investor Group. “This insight and other research from our How America Saves report gives us the insights we need to work with plan sponsors to build stronger plans that lead to better participant outcomes. That’s ultimately our goal.”

Several factors influence contribution rates, such as income, age, and job tenure. (Higher-paid, older, more tenured workers are generally saving more.) What else influences saving rates? According to the report, the plan decisions made by employers play an increasing role.

It used to be that employees had to take action to enroll in an employer’s retirement plan. Now, plan sponsors have the option to flip the script, requiring participant action to opt out of an employer’s retirement plan. The upside? In general, higher saving rates. That’s true across income level, age, job tenure, and even gender. Participants who join a plan with voluntary enrollment contribute an average of 8% of salary. Employees hired under an automatic enrollment feature, meanwhile, saved nearly 40% more, with an average contribution rate of 11%.

Not only are autoenrolled participants saving more, but more employees are saving, too. Plans with an automatic enrollment feature had a 93% participation rate, compared with a 70% participation rate for plans with voluntary enrollment. Among employees earning less than $30,000, the participation rate for autoenrolled participants was more than double that of those with voluntary enrollment.

Plan sponsors recognize this trend; autoenrollment is now adopted by 58% of plans, up from just 10% of plans in 2006 (the first year after the Pension Protection Act of 2006 took effect). Among larger plans—those with 1,000 participants or more—a full 76% of plans now feature autoenrollment.

Automatically enrolling participants into plans is just the starting point. Other retirement plan features that can advance saving rates include:

A higher starting deferral default. Most plans defaulted automatic enrollment saving rates at less than 3% in 2005. As of 2022, most defaulted automatic enrollment at 4% or more. More than a quarter chose a default of at least 6%.

An automatic annual deferral increase. To help participants more seamlessly reach saving targets, plan sponsors are adopting an automatic annual deferral increase. Vanguard recommends automatic increases be capped at an amount where participants are saving 15% or more, including employer contributions.

Earlier plan eligibility. 72% of plans allow employees to make voluntary contributions immediately after joining their employer. That’s up from 61% in 2013.

Employer contributions. The average value of a promised match is 4.5% of pay; among plans with a nonmatching employer contribution, the average contribution was equivalent to 5.1% of pay.

“Our hope is that our research will lead plan sponsors to identify at least one action that can help build a stronger plan,” said James, “which can ultimately lead to more positive outcomes for plan participants.”

• Vanguard reports record 401(k) participation (press release, issued June 2023)
• How America Saves 2023 (115-page PDF, issued June 2023)
• Positive signs in a challenging economy (article, issued February 2023)
• SECURE 2.0 is a step forward for retirement planning | Vanguard (article, issued January 2023)