Even in the face of inflation, Americans continued to save a record 11.7% in their 401(k)s in 2023, on par with 2022, according to Vanguard’s How America Saves report.

This breaks down to average contributions of 7.4% by employees alone and employers kicking in an average match of 4.3%.

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Also of note: an unprecedented 43% either took the initiative to increase their contribution rate or saw it bumped up through auto escalation.

“Smart plan design features are removing barriers to saving,” says John James, managing director and head of Vanguard Institutional Investor Group. “Growth of advice and financial wellness tools are encouraging investing behaviors that lead to retirement readiness for more Americans.”

Nearly six in 10, 59%, of Vanguard plans automatically enroll their workers in their 401(k) plan at a contribution rate of 4% or higher, and many pair that with automatic contribution escalations of 1% or more a year. Ten years ago, only 35% of Vanguard plans defaulted employees into a plan at a rate of 4% or higher.

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However, the average balance in the report, based on the retirement savings behaviors of nearly five million American workers in Vanguard plans, was a mere $134,128, hardly enough for a worker to be able to comfortably retire. The average balance rose 19% in 2023, compared to the S&P 500’s 24% gain.

The percentage of participants taking hardship withdrawals rose to a record 3.6%, with nearly 40% of those withdrawals to avoid a home foreclosure or eviction, followed by medical expenses.

Three out of four Vanguard plans offer employees financial advice, and a record 64% of all of Vanguard’s 2023 contributions went into target-date funds. These “set-it-and-forget-it” funds encourage inertia, and in 2023, it worked to retirement savers’ benefit, with only 1% of investors in a single target-date fund making a trade in 2023.

“The 401(k) plan is evolving, bringing together not just retirement savings, but also broader financial wellness support for employees,” James adds.

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