Participants’ Progress

Several recent surveys report that plan participants have made good progress with their savings over the past decade and are more confident about their retirement finances. However, other studies found that participants are struggling financially and worry that they won’t have sufficient funds saved for retirement.

Experts point to a number of “bets” that have paid off by retirement industry players—but to improve outcomes even further, more plan solutions and levers will need to be pulled. The results of those decisions will impact whether the progress in workplace retirement savings will continue apace over the next 10 years.

The Good News

Multiple plan participation and participant-behavior metrics have been improving over the past decade.

Vanguard’s How America Saves 2024, which provides results for Vanguard’s plans through 2023, notes that higher percentages of employees are now auto-enrolled and participating in their plans than a decade ago. They’re saving more, and they’re using professionally managed portfolios—dominated mostly by target date funds—more frequently:

According to Mike Shamrell, vice president of workplace thought leadership, Fidelity's results show a similar trend. The company’s 401(k) plans’ overall participation rate has increased from 68% 10 years ago to 74% in 2023, and the number of plans with auto-enrollment has grown from 26% to 39%. Almost 40% of plans have a 5% or higher default savings rate, and 61% of participants have consolidated their savings in a target-date fund.

Fidelity calculates a retirement savings assessment to determine if the typical American household is on track to meet its estimated retirement spending needs. In 2015, the median score was 74% (a "fair" rating). It increased to 85% in 2017 ("good" rating) and pulled back to 78% ("fair") in the 2023 study.

Employees’ outlook on their retirement finances has improved, too. The 2024 Retirement Confidence Survey from the Employee Benefit Research Institute and Greenwald Research reported that in 2014, 72% of workers with a retirement plan (individual retirement account, defined contribution, or defined benefit) were either very confident or somewhat confident that they would have enough money to live comfortably throughout retirement. That percentage increased to 77% in the 2024 survey.

The Not So Good News

But it’s not all good news.

The 2024 WTW Global Benefits Attitudes Survey United States identified several problems. Among employees aged 50 and older, 56% were somewhat confident or very confident about their ability to live comfortably for the first 15 years of retirement versus 61% in 2013.

Meanwhile, fifty-six percent of employees reported saving less than 8% of their pay for retirement, and only 34% ranked as on track for retirement. Financial self-assessments were similarly negative, with 41% reporting they were “not on the right track with respect to my finances.”

“Despite the increase in programs’ utilization, we see that a greater share of employees are concerned about being able to retire,” says Jennifer DeMeo, managing director of integrated and global solutions with WTW. “More are saying they expect to have to work past age 70 or being concerned that they are not going to be able to live comfortably in retirement.”

Key Levers to Improving Participation

Experts highlight several factors that have improved plan metrics over the past decade.

Craig Copeland, EBRI's director of wealth benefits research, cites auto-enrollment and defaults into target-date funds as two key factors. He also points to participants’ increased awareness of the need to save for retirement.

“I certainly think there is a better understanding and more focus on saving for retirement,” he says. “If you went around 10 years ago, certainly 20 years ago, you did not see that same type of understanding and expectation that there is now that you have to be doing this and paying attention to it.”

DeMeo believes that sponsors' growing recognition of the need to change employees' financial behaviors and address their overall economic well-being is another lever that has helped participants. A decade ago, sponsors were more focused on increasing overall plan participation levels, she says. That focus has broadened with the understanding that employees “need to be able to manage their short-term needs to also save for retirement—the two are connected,” DeMeo explains.

Providing advice is another tool for improving participant outcomes, says Jane Greenfield, principal and head of consultant relations at Vanguard.

“Participants enrolled in advice tend to be more engaged and demonstrate stronger savings behaviors than their peers, including higher average savings rates,” she explains. “The percentage of plans offering managed account advice is at an all-time high, and more than three in four participants now have access to advice.”

Stumbling Blocks

Several problems could impede additional progress. EBRI surveys have found that non-participating employees often believe they lack sufficient funds for plan contributions. Other workers, particularly those at small employers, lack access to workplace plans.

WTW’s DeMeo points to the multiple demands on employees’ finances: “We see a growing number of people living paycheck to paycheck and concerned about short-term needs.”

Another stumbling block is job mobility. The typical American has nine jobs throughout their career, says Greenfield. In moving from one job to the next, they might move from a 401(k) where they had increased their deferral each year and maxed out their savings to a new plan with a 3% default rate.

Vanguard’s research found that these repeated slowdowns in savings caused by job changes can result in potentially having 35% less money saved at retirement.

Despite the challenges, it's been a good decade for participants overall, and Greenfield believes the outlook is encouraging.

“We can build on that strong foundation with increased personalization,” she says. “AI and other emerging technology can help deliver personalized experiences for participants that help them take the next best action.”