"It would be great if that number was 100%," said David Stinnett, Vanguard's head of strategic retirement consulting. Vanguard's How America Saves 2026 report shows average 401(k) balances in the United States rose nearly $20,000 in 2025 to $167,970, while median balances climbed to $44,115. The firm ties the record levels to strong equity returns in 2025 and to wider use of automatic plan features that lift participation and contributions. Vanguard also warns that rising hardship withdrawals and loan activity underline persistent gaps for lower-income workers.

Vanguard's annual study emphasises the role of automatic enrolment in boosting retirement saving.

The headline numbers are stark. Vanguard records the average balance for a Vanguard 401(k) at $167,970 in 2025, up nearly $20,000 from the previous year. The median balance, a better reflection of the typical saver because it is not skewed by a small number of very large accounts, moved to $44,115 in 2025, an increase of almost $6,000 year on year.

Why balances rose

Vanguard links most of the gains to two forces. First, most 401(k) assets remained invested in equities, and strong stock-market performance in 2025 amplified returns for savers. Second, plan design has shifted in ways that raise participation and contributions. The report finds that among participants who remained active across the year, balances rose markedly and a large majority saw year-on-year gains.

Participation and contribution measures hit fresh highs in 2025. The combined employer and employee contribution rate reached 12.1%. Crucially, one quarter of participants now defer more than 10% of their pay, a notable increase compared with earlier in the decade.

Mastheads

Plan design has been the lever. The share of Vanguard-defined contribution plans using automatic enrolment has increased substantially since the mid-2000s. Many plans also include automatic escalation of deferral rates, which nudges employees to save a greater share of pay over time without requiring active choices.

Who is still vulnerable

Vanguard's report does not present a uniform picture. It flags growing use of plan features as a double-edged sword, with hardship withdrawals and loan activity underlining that many workers still treat retirement accounts as a source of near-term liquidity. Hardship withdrawals rose in 2025, and Vanguard notes the trend has accompanied the wider use of automatic enrolment. Most hardship withdrawals were taken by lower-income workers.

Loan activity also increased and remains a common form of access. Vanguard characterises loans as a more cautious option because they are repaid to the participant's own account, whereas withdrawals are often never fully restored. Still, both behaviours reduce retirement account balances relative to a no-withdrawal path and can blunt the benefits of stronger markets and higher contribution rates.

The report also points to regulatory and administrative changes that may have contributed to patterns of access. Vanguard suggests that streamlined rules making hardship access easier are a likely factor in the rise in withdrawals, even as plan design changes expand participation.

Vanguard offers a set of practical nudges it says could broaden the gains seen in 2025. The firm highlights wider adoption of automatic enrolment and automatic escalation as key measures to pull more workers into saving and to raise contribution rates over time. It also recommends periodic re-enrolment or targeted outreach to former participants who opted out, as a method to re-engage people who may otherwise fall out of the system.

Methodologically, How America Saves 2026 presents data for calendar year 2025 and draws its year-over-year comparisons, participation statistics, and behavioural observations from Vanguard's defined contribution plan universe and participant-level data. That scope means the findings reflect the company's large sample of employer-sponsored plans and the choices of their participants.

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Vanguard recommends wider adoption of automatic enrolment and automatic escalation as the clearest way to extend the 2025 gains to a broader group of workers.

This article was created with AI assistance.