Plan sponsors building on the power of
automatic features with personalized advice offers
VALLEY
FORGE, Pa., June 15,
2023 /PRNewswire/ -- Participation rates in 401(k)
plans recordkept by Vanguard have reached an all-time high, driven
by the continued power of design features like automatic enrollment
and automatic annual increases. The firm's annual release of How
America Saves—an industry-leading compendium of the retirement
savings behaviors of nearly five million American workers—also
reports that employers are increasingly bolstering 401(k) plans
with services designed to meet the broader financial needs of their
employees, including advice.
"It is encouraging to see a record number of U.S. plan
participants saving to secure their financial futures," said
Tim Buckley, Vanguard Chairman and
CEO. "Automatic solutions revolutionized retirement planning over
the last decade. However, investment success depends not only on
the funds you hold but also the advice you get on those funds. The
next frontier of retirement savings will be advanced by
personalized advice that helps investors reach their long-term
goals."
In 2022, 41% of all plans offered advice services; amongst
larger plans with more than 5,000 employees, 81% offered advice.
Altogether, nearly three in four plan participants now have access
to advice, such as a robo-advisor or guidance from a CFP. Other
notable findings from How America Saves, now in its
22nd edition, include:
- Automatic enrollment removes barrier to entry: This
year's report featured a record-high plan participation rate of
83%. Adoption of automatic enrollment, one of the leading catalysts
for plan participation, has more than tripled since the passage of
the Pension Protection Act in 2006. Today, nearly 58% of plans and
76% of plans with at least 1,000 participants have adopted this
design, bypassing the inertia and procrastination often responsible
for inhibiting voluntary enrollment.
- Retirement savers stay the course: Despite significant
market uncertainty, nearly a quarter of participants saved at least
10% of their income for retirement and the average deferral rate
remained at a historic high of 7.4%. With nearly 98% of
participants also offered some type of employer contribution, the
total average contribution rate was 11.3%.
- Plan features help participants weather market
volatility: Participant trading has dramatically declined over
the last 15 years, with just 6% of participants trading last year.
This is attributable to the increased adoption of target-date funds
and retirement savers valuing buy-and-hold strategies. The
sophisticated simplicity of professionally managed allocations such
as target-date funds is leading the trend, as just 2% of those
participants traded during the same timeframe.
"Building on the proven benefits of smart plan design, employers
are increasingly exploring more comprehensive efforts to help their
employees reach their long-term financial goals," said John James, managing director and head of
Vanguard Institutional Investor Group. "In addition to advice,
forward-thinking plan sponsors are offering financial wellness
tools such as student debt paydown and supplemental savings
accounts like HSAs. In partnership with Vanguard, sponsors are
making vital enhancements to not only support talent attraction,
but to also put savers on a personalized path to better investment
outcomes."
For decades, Vanguard has served as a trusted partner to defined
contribution plan sponsors and consultants, offering advice and
investment solutions, as well as industry-recognized retirement and
investment thought leadership. Vanguard Institutional Investor
Group marries deep retirement capabilities with technology-driven,
client-centric innovation to deliver a comprehensive, world-class
recordkeeping experience and help plan sponsors make data-enabled
plan design decisions to help give millions of retirement savers
the best chance for investment success.
About Vanguard
Founded in 1975, Vanguard is one of the world's leading investment
management companies. The firm offers investments, advice, and
retirement services to individual investors, institutions, and
financial professionals. Vanguard operates under a unique,
investor-owned structure where Vanguard fund shareholders own the
funds, which in turn own Vanguard. As such, Vanguard adheres to a
simple purpose: To take a stand for all investors, to treat them
fairly, and to give them the best chance for investment success.
For more information, visit vanguard.com.
All investing is subject to risk, including the possible loss of
the money you invest.
For more information about Vanguard funds, visit
institutional.vanguard.com or call 800-523-7064 to obtain a
prospectus or, if available, a summary prospectus. Investment
objectives, risks, charges, expenses, and other important
information about a fund are contained in the prospectus; read and
consider it carefully before investing. Investments in
target-date funds are subject to the risks of their underlying
funds. The year in the fund name refers to the approximate year
(the target date) when an investor in the fund would retire
and leave the work force. The fund will gradually shift its
emphasis from more aggressive investments to more conservative ones
based on its target date. An investment in target date funds is not
guaranteed at any time, including on or after the target
date.
Advice services are provided by Vanguard Advisers, Inc., a
registered investment advisor, or by Vanguard National Trust
Company, a federally chartered, limited-purpose trust
company.
Vanguard Marketing Corporation, Distributor.
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SOURCE Vanguard
