Retirement Savings Rates Hit a Record Level High in 2025
Retirement Savings Rates Hit a Record Level High in 2025
The outlook for retirement savings showed encouraging signs in 2025. A growing number of participants increased how much they were saving for retirement, with 45% increasing their contributions. In addition, the average total savings rate reached a record 12.1% of income in 2025, according to Vanguard’s How America Saves 2026. Average account balances also rose 13% year over year. Participants demonstrated a willingness to stay the course during periods of market volatility with only 5% of participants making investment changes. Among those invested entirely in a single target date fund (TDF), just 1% made a change. The findings suggest participants are continuing to build stronger savings habits and are showing a willingness to stay the course during uncertain times.
Automatic Features Drive More Savings
The use of automatic enrollment has more than tripled since 2006. In 2025, 70% of plans offering auto-enrollment also included automatic annual deferral increases. Auto-enrollment continued to have a significant impact on plan participation. Vanguard found that plans with auto-enrollment had a participation rate of 94% which is 30 percentage points higher than the 64% rate for plans relying on voluntary enrollment. Plans are also adopting higher default contribution rates. In 2025, 62% of plans defaulted employees at a deferral rate of 4% or higher, compared to 43% of plans in 2015.
These auto-enrollment features also helped raise overall savings rates for employees. When all eligible employees were included — even those who never enrolled — plans with automatic enrollment produced an average savings rate of 12.2%, compared to 7.5% for plans relying on voluntary enrollment. The difference reflects the significantly higher participation levels generated by automatic enrollment.
Target-Date Funds Also Play a Role
Target-Date Funds (TDFs) are now offered by 96% of all Vanguard managed plans, and 98% of plans use TDFs as the qualified default investment alternative (QDIA). Vanguard data also shows that 84%
of participants used TDFs when offered, while 73% of target-date investors had their entire account invested in a single TDF. TDF investors also showed notable discipline during a volatile period. During the spring of 2025, 21% of trading days saw stock prices change by ±1%, while 2% saw changes of ±3%.
TDFs are investment vehicles designed to provide investors with a retirement savings strategy over time by automatically adjusting the TDF asset allocation mix along the risk spectrum as the investor approaches retirement age. The TDF includes a year (vintage) in its name, which is generally when the investor plans to start redeeming from the TDF, unless it is a retirement vintage designed for those who are retired. Generally, the TDF initially has more exposure to equities early on and more exposure to fixed income as the TDF approaches its target date. A TDF is not guaranteed at any time, including at and after the target date; it does not guarantee sufficient income in retirement.
Sources:
https://workplace.vanguard.com/content/iig-transformation/pdf/how-america-saves-2026.html