Retirement Savings Reached an All-time High in 2025
U.S. retirement savings metrics continued to strengthen in 2025, with 45% of participants increasing their contributions and the average total savings rate reaching a record 12.1%, according to Vanguard's How America Saves 2026. Average account balances rose 13% year over year.
During periods of market volatility, only 5% of participants made investment changes, while only 1% of those invested entirely in a single target date fund (TDF) did so. The findings suggest participants are continuing to build stronger savings habits and may be showing a willingness to hold steady during uncertain times.
Automatic Features and Savings
The use of automatic enrollment has more than tripled since 2006. Among plans that offered automatic enrollment in 2025, some 70% included automatic annual deferral increases.
Automatic enrollment continued to have a significant association with plan participation. Vanguard found that plans with automatic enrollment had a 94% participation rate, compared with 64% for plans relying on voluntary enrollment, a difference of 30 percentage points. Plans are also implementing higher default contribution rates. Some 62% of plans now default employees at a deferral rate of 4% or higher, compared with 43% of plans in 2015.
Automatic features were also associated with higher overall savings. Looking across all eligible employees, including those who never enrolled, automatic enrollment plans produced an average savings rate of 12.2%, compared with 7.5% for voluntary enrollment plans. The gap reflects substantially higher participation in automatically enrolled plans.
Target Date Funds
Some 96% of all Vanguard managed plans now offer TDFs in their plan lineups, and 98% of plans use TDFs as the qualified default investment alternative (QDIA). Vanguard data also shows that some 84% of participants used TDFs when offered, and 73% of target date investors had their entire account invested in a single TDF.
TDF investors appeared to hold steady during a volatile period. During the spring of 2025, 21% of trading days saw a change in stock prices of plus or minus 1%, and 2% saw a change of plus or minus 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, and it does not guarantee sufficient income in retirement.
Sources:
- Vanguard: Vanguard's twenty-fifth How America Saves reveals quiet retirement revolution (press release)
- Vanguard: How America Saves 2026
Material connection: Retirement Plan Advisory Group, https://www.rpag.com
This article is provided for general educational purposes only and is not legal, tax, or individualized investment advice.
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