Beth Pinsker
5 min read
Is how America is saving for retirement in line with how you are saving? Vanguard’s “How America Saves” report on the state of 401(k) participation is now in its 24th year, and for the moment, all the trend lines are pointing up. That’s good news for the most part, but there are some cracks beneath the surface. While 401(k) savings rates and balances are up, so are hardship withdrawals.
First, the positive: The average 401(k) balance among nearly 5 million accounts in Vanguard’s data set was $148,153, up over 9% from the year before. The average participant rate of return was 13.7%. The average employee percentage of salary contributed, known as the deferral rate, was 7.7%, and when combined with employer contributions, it was 12%.
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Perhaps the best news of all is that the proportion of participants who increased their contribution rate rose to 45%, with 29% automatically increasing and 16% taking active steps to increase.
“One might expect to lose ground in tough years, but we’re seeing one positive year following the other,” said David Stinnett, head of strategic retirement consulting at Vanguard. “That’s attributed to automatic plan designs that provide this suit of armor around the 401(k) system. It’s a very positive thing to see.”
Despite the rosy general picture, when you dig down deeper, there are some issues to be concerned about for retirement savers.
The “average balance” measure among so many participants can be deceptive because it includes many so-called “super savers,” who max out all the available options to them, plus older and higher-paid employees. If you measure by the median, which is looking at the middle of the pack, the numbers are lower. Median 401(k) balances were only $38,176 in 2024, with a participant contribution rate of 6.8% and a combined rate with matching of 11.5%. During the year, 8% decreased their contributions and 2% stopped them altogether.
Another area of concern is withdrawals. Some 80% of plans allow loans, and consistently in the past five years, 13% of participants have had an outstanding loan balance. Withdrawals have been going up in recent years, however. Some 4.8% of participants took hardship withdrawals and 4.5% took non-hardship withdrawals in 2024, up from 1.7% and 3.4% in 2020, respectively. That reflects both worsening economic conditions and loosening restrictions on withdrawals.
