401(k) plan participants once again saved at historic rates in 2023, with a record-high number of participants also increasing their savings rate. How America Saves, Vanguard's annual report on the retirement savings behaviors of nearly five million American workers, found that the average participant deferral rate matched the historic high of 7.4% in 2023. When combined with employer contributions, the average participant total savings rate kept pace with the all-time high of 11.7% reached the prior year.

"Smart plan design features are removing barriers to saving. Growth of advice and financial wellness tools are encouraging investing behaviors that lead to retirement readiness for more Americans," said John James, managing director and head of Vanguard Institutional Investor Group.

For more than two decades, How America Saves has documented retirement plan design and its impact on American workers' saving and investing behaviors. This year's report found encouraging plan design trends that led to workers increasing their savings and improving their investing behaviors.

• Automatic solutions bolster employee savings: In 2023, a record-high 59% of plans offered automatic enrollment, which research has shown improves participation rates. Among auto-enrollment plans, 60% defaulted employees at a deferral rate of 4% or higher, an all-time high. Ten years ago, only 35% of plans defaulted employees into the plan at a rate of 4% or higher. More participants than in any previous How America Saves report (43%) increased their savings rate in 2023, driven in part by plan design features like automatic annual savings increases.

• Advice becomes more accessible: The percentage of plans offering managed account advice is at an all-time high, and more than 3 in 4 participants now have access to advice. Additionally, a record-high number of participants with access to advice enrolled in the service in 2023.

• Employers make it easier for workers to invest for the long-term: Only 1% of investors who invest exclusively in a single target-date fund traded in 2023. A record-high 64% of all 2023 contributions went into target-date funds, which many employers offer as an automatic or default investment strategy.

The future of 401(k) plan design
As 401(k) participants benefit from the impact of strong plan design features like automatic solutions, plan sponsors continue to expand the breadth of offerings available within retirement plans.

"The 401(k) plan is evolving, bringing together not just retirement savings, but also broader financial wellness support for employees," said Mr. James. "Together with plan sponsors and consultants, we are building on the strong foundation of plan design features such as auto-enrollment to better enable employees to reach their financial goals through advice and innovative technology."

Vanguard's financial wellness experience for retirement plan participants includes tools for emergency savings, debt paydown, tax-efficient savings strategies, student debt management, and more, with additional enhancements continuously added to the digital platform. Vanguard works closely with employers to personalize recommendations and guidance for plan participants, resulting in an increase in positive retirement savings actions such as higher paycheck contributions*.

Vanguard is committed to giving people the best chance for investment success, including through providing plan sponsors and plan participants with leading advice and investment solutions, world-class recordkeeping technology, and actionable, data-driven thought leadership including How America Saves. How America Saves provides a detailed snapshot of the U.S. defined contribution retirement landscape and serves as an important source of benchmarking and insights for plan sponsors and consultants.