Vanguard recently released the 2024 edition of their annual How America Saves report, a detailed, 113-page report targeted at industry professionals which looks across millions of their 401k, 403b, and similar defined-contribution retirement plans. Personal finance geeks rejoice! Here are a few select bits that caught my eye.
Median employee contribution rate was 6.2{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38}. Median means that half of people were saving more, while half were saving less. This out of all participants. Average is weighted more by absolute dollar savings. The overall historical trend is rising slowly.
Median total contribution rate was 11{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38}, which includes employer match. Nearly everyone gets some sort of employer match The overall historical trend is also rising slowly.
How much does Vanguard think we should be saving? Vanguard believes that if your income is under $50,000, you should be saving at least 9{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} total. If your income is $50k to $100k, you should be saving at least 12{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} total. If your income is over $100k, you should be saving at least 15{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} total.
About half of workers are “saving effectively” according this definition.
What about the “Super Savers”? Overall, 14{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} of participants saved the maximum allowed tax-advantaged amount in 2023. Maxing it out was very rare at less than 100k income levels. 53{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} of those with incomes of $150,000+ maxed out their contributions. Here is the full breakdown by income:
More are going beyond the traditional “maxing out the 401k. Interestingly, 9{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} of participants used the after-tax contribution option if it was available. 23{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} of those with incomes of $150,000+ maxed out used this option. I am assuming that many of these people are going for the “Mega Backdoor Roth”.
Asset allocation. This chart shows the trends in asset allocation as the participants age. The increased use of Target-Date Funds (TDFs) and other professional management options has changed it so that young people are less and less likely to hold cash. Asset allocations are becoming more uniform and aligned with TDFs in general.
