Research summary

Three strategies to boost employee retirement savings

July 26, 2022

Higher defaults lead to stronger savings
Automatic enrollment default trends

Vanguard defined contribution plans with automatic enrollment

Bar chart shows how the percentage of Vanguard defined contribution plans with automatic enrollment that have increased the default contribution rate over time. The lines show a general trend toward increased contribution rates. In 2005, 73% of these plans had a default rate of 3% or less, while 27% had a default rate of 4% or more. By 2021, the percentage of plans with a default rate of 3% or less had declined to 42%, while the percentage of plans with a default rate of 4% or greater had risen to 58%.
1. Incorporate an automatic enrollment feature
2. Set the default deferral contribution rate to 6% (or at least to a rate that captures the employer match)
3. Systematize reenrollment, automatic escalation, and undersaver sweeps

Contributor

Jeff Clark
Vanguard Insights

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