Wed, Jun 25, 2025, 7:35 AM5 min read

Americans set aside an all-time high portion of their paycheck in their 401(k) accounts last year, according to Vanguard's "How America Saves 2025" report.

On average, Americans saved 7.7% of their paycheck in their employer-provided retirement plan last year — a record high — and nearly half of participants juiced up their savings rate, up from 39% who did so in 2022.

When you kick in employer contributions, the average total participant contribution rate was 12%, up from 11.3% four years ago, per Vanguard. "That's a very good thing because what flows from that are positive retirement outcomes," David Stinnett, head of strategic retirement consulting at Vanguard, told Yahoo Finance.

"We recommend saving 12%-15% of your income for retirement," he added. "This year's total average savings rate puts workers in that range."

Vanguard's annual report unpacks the retirement savings behaviors of nearly 5 million American workers.

The big news: The impact of target-date retirement funds on savings. But the report wasn't a complete knock 'em out of the park for savers due to a small but notable portion of participants turning to hardship withdrawals.

The driving force behind the rise in contributions and worker participation in retirement plans is tied to more employers automatically enrolling new employees in their retirement plans with no waiting period. More than 6 in 10 plans now do so, typically earmarking those contributions to a target-date retirement fund. (Workers can opt out if they choose.)

Read more: How much can you contribute to your 401(k) in 2025?

That's roughly double the number of plans that did so a decade ago. Even better, nearly two-thirds of employer plans in this year's report set the default savings rate, or the percentage of a new contributor's paycheck shifted into the employer retirement plan, at 4% or higher. Roughly 30% of plans are setting defaults at 6% or higher — nearly double the proportion of plans choosing 6% or more in 2015.

Again, workers can tweak that amount as they see fit. But for most people, inertia kicks in and they let it be.

"Automatic enrollment in 401(k) plans helps workers overcome many of the common barriers to saving for retirement — lack of planning skills, difficulty with complex financial decisions, or procrastination," Jeff Clark, head of defined contribution research at Vanguard, told Yahoo Finance.

Among auto-enrollment plans, around 7 in 10 of Vanguard's plan participants have their contribution level automatically bumped up annually by their employer, usually by 1% to 2%, not so subtly pushing people to save more each year.