As detailed in this year’s report, 401(k) plans keep evolving, thanks in large part to plan design improvements made over the past 20 years. Retirement plan sponsors are putting more decisions on autopilot, so it’s easier for workers to participate, save more, and choose appropriate allocations for their assets. 

Employees used to have to take action to enroll in an employer’s retirement plan. Now, a majority (59%) of plan sponsors enroll employees automatically, requiring participants to opt out of a plan if they don’t want to take part in it. 

Nearly three-quarters of larger plans (those with over 1,000 participants) have a feature that automatically enrolls participants. About three in four participants in these larger plans are enrolled in plans with autopilot designs (although autoenrollment itself may only apply to newly eligible participants). Among younger workers (age 25–34), participation rates are up 12% over the past 10 years.

“Plan designs have never been stronger, and participation rates remain at an all-time high,” said Jeff Clark, author of the report and head of defined contribution research at Vanguard. “These improvements are disproportionately helping younger participants, especially.” 

Participants are saving a total of 11.7% of their pay on average—a record high. Six in 10 plans now have a default automatic enrollment savings rate of 4% or more, while as recently as 2016, the majority of plans had a default savings rate of 3% or less. In fact, 29% of plans today have a default savings rate of 6% or more, nearly double the proportion of plans choosing that number a decade ago.

“When you consider that the typical worker is now changing jobs about every four years, those initial defaults with an autoenrollment plan are really meaningful,” said Clark. “More plans are starting participants at 4%, 5%, or 6% of pay instead of, say, 2% or 3%. Those increased defaults are prompting younger workers to save more, especially as they get started in their careers.”

Vanguard recommends a combined savings rate of 12%–15% per year, including both employee and employer contributions. Many savers are a stone’s throw from that range. Adding an automatic savings rate feature, which 69% of plans now implement, is one more tool to get savers closer to that goal. 

Participants are turning to professionally managed allocations in record numbers, due in large part to the increased availability of target-date funds and managed account advice on retirement plan platforms.

The number of plans offering target-date funds—which determine portfolio allocations based on an expected retirement date and turn more conservative as a participant approaches retirement age—has steadily increased in recent decades. At the same time, more companies are providing target-date funds as the qualified default investment alternative for automatic enrollment programs.

“More younger workers—more than eight in 10—are using a professionally managed allocation,” said Clark. “This has led to a massive improvement in age-appropriate equity allocations among young participants.” 

Over time, plan participation rates have increased, autopilot designs have been strengthened, and portfolio construction has improved to offer more age-appropriate allocations. These trends underscore the priority that plan sponsors have placed on participant well-being.

• How America Saves 2024 (114-page PDF, updated June 2024)
• Vanguard Announces Record Retirement Savings Rates Among American Workers (press release, issued June 2024)