Eyes on the Prize

Despite Challenges, Americans Remain Focused on Saving for Retirement

In the face of economic uncertainty, market volatility, geopolitical unrest and the ongoing COVID-19 pandemic, plan participants have continued to save for retirement. Vanguard’s annual report, “How America Saves 2022,” cites a number of encouraging factors that are contributing to this trend.

Plan Sponsor Support

The report acknowledges that the pandemic has brought more attention to the unstable position of most Americans’ finances (70% of Americans surveyed say anxiety over finances is their top stressor). Survey results also indicate that more employers are realizing that anxiety over finances jeopardizes an employee’s path to a successful retirement. Therefore, they are working with their advisors to implement smart plan design strategies to get their employees enrolled and saving at higher rates. In addition, more employers are broadening their focus beyond retirement to help employees manage other basic financial needs, such as budgeting, debt management, emergency savings and student loan repayment.

Contribution Rates Stay Steady

Vanguard’s survey found that participants’ median total contribution rate — including participant and employer contributions — was 10.4% in 2021, compared to 10.5% in 2020. Vanguard credits plan sponsors adopting automatic deferral and automatic escalation for the rate staying constant through the pandemic, market volatility and rising inflation. However, roughly half of retirement plan participants continue to save below the recommended savings rate of 12% to 15% of their salary. Vanguard found that slight deferral increases could help close this savings gap, as about 20% of participants saving below these levels are just 1%-3% away from the target savings rate.

Growth in Managed Account Advice Services

Plan sponsors are also increasingly offering tools and resources to support employees with their saving and investment planning. For example:

  • Forty-one percent of all Vanguard DC plans offered managed account advice in 2021, versus 30% in 2017.
  • The percentage of participants who were offered managed account advice was 74% in 2021, versus 55% in 2017.
  • The percentage of participants who were offered managed account advice and used the service was 10% in 2021, versus 7% in 2017.

Other Notable Progress in 2021

  • Only 2% of participants stopped contributing and only 7% decreased their salary deferrals.
  • Seventeen percent of participants made a participant- directed increase, 25% made an increase due to auto-escalation and 49% made no change.
  • Fifty-eight percent of plan sponsors using auto-enrollment increased the default contribution rate to 4% or higher.

Click here Vanguard’s “How America Saves 2022”


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