The Vanguard Participant Saving Rate Index
By Jeffrey W. Clark & Jean A. Young
Saving rates are fundamental to retirement wealth accumulations. In this paper, we assess whether Vanguard defined contribution plan participants are saving optimally in their current workplace retirement plan.
● We find that 7 in 10 defined contribution plan participants are saving at rates that would enable them to attain a 65% replacement rate in retirement. Saving rates include both the employee elective contributions and any employer contributions.
● We find that a modest increase in participant elective deferral rates of 1, 2, or 3 percentage points would enable 7 in 10 plan participants to attain a 75% replacement rate in retirement. Four in 10 participants are enrolled in automatic annual saving rate escalation and will automatically see their saving rates rise.
● Plan design—both the default enrollment rate and the value of employer contributions—remains a powerful driver of participant saving rates. Strong automatic enrollment defaults and generous employer contributions predict saving effectively
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