401(k) Plan Design Improvements Make Retirement Savers More Resilient

New report shows modern plan design boosts savings and supports long-term investing.

VALLEY FORGE, Pa., June 24, 2025 /PRNewswire/ -- Workplace retirement plan designs make saving easier and more attractive for workers according to How America Saves, Vanguard's annual report on the retirement savings behaviors of nearly five million American workers. As a result, plan participants demonstrate stronger saving and investing behaviors. The report finds that average retirement plan participant savings rates have reached a new high, and a record 45% of participants increased their savings rate in 2024.

"Today's 401(k) plans are not just about saving; they're about building a financial future for millions of Americans. The advancements we've seen in plan design, from auto enrollment to higher default rates, make a real difference," said Lauren Valente, Managing Director of Vanguard Workplace Solutions.

Workers Save Earlier and Invest with Support
Vanguard has published How America Saves, a detailed snapshot of the U.S. defined contribution retirement landscape, for more than two decades. This year's report reveals how improvements in plan design have led to more workers displaying strong saving and investing behaviors.

• Employers jumpstart workers' retirement savings. A record-high 76% of plans now allow for immediate eligibility, and 61% of automatic enrollment plans now default employees into a paycheck deferral rate of 4% or higher.
• Retirement savers show heightened tax awareness. Eighteen percent of participants make Roth contributions to their 401(k) plan, an all-time high. Additionally, 86% of plans now allow Roth contributions.
• Plan participants rely on guidance. More participants than ever before (67%) have their entire 401(k) balance invested in a professionally managed allocation, whether a target-date investment product or managed account advice.

Beyond Retirement Savings
Assets in 401(k) plans are intended to be preserved for retirement, but most 401(k) plans allow participants to access a portion of their savings when they have a demonstrated financial hardship. In 2024, 4.8% of participants initiated a hardship withdrawal, a modest increase worth noting despite the reality that the vast majority (95%) of participants did not take a hardship withdrawal. The data underscores the importance of financial wellness and emergency savings tools for the many retirement plan participants who balance both short- and long-term savings goals on their journey to retirement. Vanguard offers a Cash Plus Account to participants to equip them with an out-of-plan emergency savings strategy.

"Workers still have obstacles to saving for retirement across their career, including short-term expenses, debt, and frequent job changes," said Valente. "We're energized to continue to address these challenges in partnership with plan sponsors and consultants to help ensure a financially secure retirement for all."

How America Saves offers a comprehensive view of plan data and industry-specific trends to help plan sponsors, consultants, and individuals make informed decisions. The full report and industry reports can be found on Vanguard's Workplace Solutions website.

About Vanguard
Founded in 1975, Vanguard is one of the world's leading investment management companies. The firm offers investments, advice, and retirement services to tens of millions of individual investors around the globe—directly, through workplace plans, and through financial intermediaries. Vanguard operates under a unique, investor-owned structure where Vanguard fund shareholders own the funds, which in turn own Vanguard. As such, Vanguard adheres to a simple purpose: To take a stand for all investors, to treat them fairly, and to give them the best chance for investment success. For more information, visit vanguard.com.

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Target-date investments are subject to the risks of their underlying funds. The year in the investment's name refers to the approximate year (the target date) when an investor would retire and leave the workforce. The investment will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. A target-date investment is not guaranteed at any time, including on or after the target date.

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