Here’s the average 401(k) savings rate and what your goals should be

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The average 401(k) savings rate — including employee deferrals and company contributions — have maintained historic levels when it comes to plan designs that make it easier for workers Set money aside.

In 2023, the average combined savings rate is estimated 11.7%reached a record high from 2022, according to Vanguard’s annual analysis of more than 1,500 qualified plans and nearly 5 million participants.

A separate report from Fidelity also showed record savings with The combined ratio is 14.2% for the first quarter of 2024. That report is based on nearly 26,000 company plans and nearly 24 million participants.

Vanguard recommends saving 12% to 15% of your income, including employer contributions to the annual pension fund. Fidelity’s benchmark is 15%.

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“You want to grow your savings by at least 1% per year” and aim for a composite benchmark of 12% to 15%, says Dave Stinnett, head of strategic retirement consulting at Vanguard. %.

The analysis found that nearly 25% of participants deferred more than 10% of their income in 2023. And 43% of employees increased their savings rate that year, Vanguard reported.

In 2023, an estimated 14% of participants will reach their 401(k) deferral limit, which is $22,500 for savers under 50 years old, Vanguard found. Maximum rate of workers implementing the plan remains the same as of 2020.

401(k) plan designs have increased savings over time

Vanguard’s report found that the average employee deferral rate returned to a record high of 7.4% in 2023 after a slight decline the previous year. According to Fidelity, employees procrastinated an average of 9.4% in the first quarter of 2024.

Stinnett said 401(k) plan features like automatic enrollment and higher default savings rates have increased employee deferrals over time.

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“They are coming in with a higher initial savings rate,” he said. “And many of these plans have an incremental or step-up function, where people automatically save an extra 1% each year.”

Stinnett said about 60% of 401(k) plans have a savings default rate of 4% or higher in 2023, compared with 35% at that rate a decade ago.

‘Several factors’ determine retirement savings goals

While financial services companies have defined retirement savings standards, the appropriate percentage will vary based on individual needs, experts say.

“I typically recommend a target savings rate of 15%, incorporating employee contributions,” says certified financial planner Alyson Basso, managing director of Hayden Wealth Management in Middleton, Massachusetts. and employer,” but the target may change based on “a number of factors.”

Each customer’s circumstances are different and their savings strategy must reflect their individual needs, goals and circumstances.

Alyson Basso

CEO of Hayden Wealth Management


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