Retirement Savers Hold Steady In 2025 As Automatic Enrollment Drives Positive Trends

Retirement plan participants remained focused on long-term goals throughout 2025, with automatic enrollment features and professionally managed allocations improving savings outcomes, according to Vanguard‘s annual How America Saves report.

The 25th edition of the annual analysis — scheduled for full release in June — shows that average participant account balances increased by 13% from the end of 2024, reaching an all-time high of $167,970. Median balances climbed 16% to $44,115.

The S&P 500 ended 2025 with a 16% gain despite earlier fluctuations, while international equities returned 32% and U.S. bonds rose 7%.

Automatic enrollment gains traction

Sixty-one percent of Vanguard retirement plans that permit employee-elective deferrals had adopted automatic enrollment by the end of 2025.

Among larger plans with at least 1,000 participants, adoption reached a record 79%.

Plan sponsors are increasingly using higher default contribution rates. Sixty-two percent of plans with automatic enrollment defaulted employees at 4% or higher — a trend that has increased every year.

Additionally, 71% of automatic enrollment plans included annual escalation features that automatically increase participants’ deferral percentages, reaching the highest level in many years, according to the report.

Savings behavior holds steady

Forty-five percent of participants increased their deferral rate during 2025, either voluntarily or through automatic annual increases, matching the record high set in 2024.

Fourteen percent of participants proactively raised their payroll deferral percentages, while 8% decreased them.

The proportion of participants who used professionally managed allocations reached an all-time high of 69% — up from 67% in 2024.

This category includes target-date funds (TDFs), target-risk funds, balanced funds and managed account advisory services. Sixty-two percent of participants were invested in a single target-date or balanced fund, while 7% used managed accounts.

The percentage of participants using a professionally managed allocation has increased by nearly 50% over the past 10 years, the report noted.

Trading remains subdued

Only 5% of non-advised participants made trades during 2025, matching the record low from 2024 despite spring market volatility.

Participants who invested solely in target-date funds were four to five times less likely to trade than other investors.

“Pure TDF investors benefit from automatic age-appropriate equity allocations and ongoing rebalancing, and they also tend to trade far less often,” the report stated. “The reduced trading among pure TDF investors suggests a focus on long-term growth and stability and less reactive behavior during periods of market fluctuation.”

Hardship withdrawal activity increased modestly as 6% of participants initiated one, up from 5% in 2024.

“Given that it’s now easier to request a hardship withdrawal and that automatic enrollment is helping more workers save for retirement, especially lower-income workers, a modest increase isn’t surprising,” Vanguard explained. “And for a small subset of workers facing financial stress, hardship withdrawals may serve as a safety net that may not otherwise have been available without plan-implemented automatic solutions.”

SECURE 2.0 adoption

Early metrics show plan sponsors are taking a selective approach to adopting optional SECURE 2.0 provisions.

Most plans have embraced expanded catch-up contributions, allowing individuals ages 60 to 63 to invest up to $11,250 annually. Among eligible participants offered this option, 13% contributed above the standard $7,500 catch-up limit.

Seven percent of plans adopted automatic portability for separated employees.

Among optional distribution provisions, qualified disaster recovery distributions had the highest adoption at 16% — followed by withdrawals for domestic abuse at 6% and emergency expense withdrawals at 4%.

Usage of these withdrawal options remained minimal at less than 0.5% when available.

Recommendations for plan sponsors

The report encourages plan sponsors without automatic enrollment to consider it, and for those with the feature to evaluate how effectively it helps participants reach total savings rates of 12% to 15%.

“Thoughtful plan features, like automatic enrollment with gradual increases, high default contribution rates for employees, and strong employer contributions, can remove barriers to saving for retirement and help boost workers’ retirement readiness,” Vanguard said.

Findings also emphasized that employees juggle multiple financial obligations beyond retirement, including student debt, health care expenses and emergency savings needs.