VALLEY FORGE, PA (June 10, 2020)—Vanguard’s 2020 edition of How America Saves, the industry’s definitive report on Americans’ retirement saving habits, found that automatic plan features helped millions of 401(k) participants adhere to their financial goals, even amid severe market volatility resulting from the coronavirus pandemic.
“Participants remained unflappable and focused throughout the recent market volatility,” said Martha King, managing director and head of Vanguard Institutional Investor Group. “This tremendous display of discipline in the wake of uncertainty is a testament to the effectiveness of world-class plan design championed by Vanguard and our plan sponsor partners.”
A premier source of 401(k) retirement savings data, How America Saves serves as an annual benchmarking tool and blueprint for best practices in defined contribution (DC) plan design for plan sponsors. As part of the continued evolution of the How America Saves series, this year, Vanguard introduced two supplemental reports that provide further insight into the defined contribution landscape. The first supplement, Insights to Action, an ongoing series within the How America Saves franchise, combines nearly two decades of 401(k) plan data with practical advice from Vanguard Strategic Retirement Consulting. The series delivers expert recommendations shown to improve plan efficacy and employee participation. Vanguard also published a companion piece, How America Saves 2020: An Update, which examines plan design and participant behavior during the first four months of 2020.
Automatic plan features encourage optimal savings behavior
Over the last two decades, innovations in default investment options, automatic enrollment, and savings rates drove higher participation and savings rates, along with declines in extreme allocations and reactive trading behavior. Drawing from nearly two decades of defined contribution data, Vanguard found that prudent plan design can help withstand a host of market conditions. Key findings from the 2020 edition of How America Saves report include:
Participants staying the course
Automatic plan features and professionally managed allocations helped nearly 95% of participants stay the course during unprecedented financial uncertainty, according to data from How America Saves 2020: An Update. Among the highlights from this supplement3:
Vanguard: A destination for retirement
Vanguard is a bellwether in the defined contribution space and leads the industry in assets under management4. As of March 31, 2020, Vanguard oversaw $1.3 trillion in DC assets under management on behalf of more than 5 million participants.
As a strategic partner to more than 1,500 plan sponsors, Vanguard Strategic Retirement Consulting—comprised of attorneys, actuaries, behavioral finance experts, and certified benefit plan professionals—works closely with sponsors to develop customized, holistic solutions that help drive better outcomes for employer plans and their participants. The team combines their expertise with advanced analytical technology and data to develop innovative solutions and proprietary tools, such as Vanguard Plan Assessment for Retirement Readiness and Plan Design Cost Estimator, designed to maximize the effectiveness of companies’ retirement plans.
Plan sponsors and retirement investors also benefit from Vanguard’s world-class investment lineup overseen by the firm’s Investment Management Group and top external fund advisors. The Vanguard funds’ history of superior fund performance is driven by rigorous fund oversight, access to world-class talent, and the firm’s ability to keep costs low through Vanguard’s mutual ownership structure5. Retirement investors continue to gravitate to Vanguard’s enduring investment solutions, particularly the Vanguard Target Retirement Series which leads the industry more than $722 billion in assets under management6.
Vanguard also serves as an advocate and thought leader, working tirelessly to ensure that policymakers keep savers’ best interests in mind. Over the past few years, Vanguard has advocated for electronic delivery of ERISA-required communications, the Public Service Retirement Fairness Act, and other key policy changes poised to meaningfully improve the retirement industry.
Vanguard is one of the world’s largest investment management companies. As of April 30, 2020, Vanguard managed $5.7 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 425 funds to its more than 30 million investors worldwide. For more information, visit vanguard.com.
Asset figures as of April 30, 2020 unless otherwise noted.
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Diversification does not ensure a profit or protect against a loss.
Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date.
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1 In 2006 the Pension Protection Act (PPA), permitted target-date funds to be qualified default investment alternatives (QDIA) in defined contribution plans, leading to increased participant adoption of target-date funds.
2 Extreme portfolio allocations are defined as portfolios holding zero equities or all equities.
3 Covers participant behavior between January 1, 2020 and April 30, 2020
4 Source: Pensions & Investments, as of Dec. 31, 2019
5 Vanguard is client-owned. As a client owner, you own the funds that own Vanguard.
6 Morningstar, as of March 31, 2020