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Vanguard’s “How America Saves 2012” found the 2011 plan participation rate was 76%, unchanged from 2010. Automatic plan enrollment continues to rise. In 2011, 29% of Vanguard plans had adopted automatic enrollment, up two percentage points from 2010. Employees in plans with an automatic enrollment feature at the end of 2011 had an overall participation rate of 80%, compared with a participation rate of only 60% for employees in voluntary enrollment plans. Seven in 10 automatic enrollment plans have implemented automatic annual deferral rate increases, up from three in 10 in 2005. Automatic enrollment particularly improves participation rates among traditional non-savers: young, short-tenure and lower-income workers. The average participant deferral rate rose to 7.1% and the median (which reflects the typical participant) was unchanged at 6%. The aggregate average plan savings rate—including both participant and employer contributions—was 10.4% in 2011. Vanguard’s view is that investors should save 12% to 15% or more. For participants with lower wages, Social Security is expected to replace a higher percentage of income, and so a lower retirement savings rate may be appropriate. For those earning higher wages, Social Security replaces a lower percentage of income, and savings rates may need to be higher. The median account balances of continuous participants—those with an account balance at both the end of 2010 and 2011—rose by 10%. Eight in 10 of these continuous participants saw their balances rise because of conservative asset allocations (for example, being invested exclusively or predominantly in fixed-income holdings) and ongoing contributions. In 2011, the median participant account balance was $25,550 and the average was $78,296. “It’s important to keep in mind that typical participants are in their mid-40s and saving 10%, with about eight years of tenure with their current employer, and 20 to 25 more years to grow their account,” said Steve Utkus, head of Vanguard’s Center for Retirement Research and co-author of the report. “Furthermore, their retirement plan assets will likely be complemented by Social Security benefits and other savings, including assets in other employer plans, a spouse’s plan, or personal savings accounts.”
Vanguard’s “How America Saves 2012” found the 2011 plan participation rate was 76%, unchanged from 2010. Automatic plan enrollment continues to rise. In 2011, 29% of Vanguard plans had adopted automatic enrollment, up two percentage points from 2010. Employees in plans with an automatic enrollment feature at the end of 2011 had an overall participation rate of 80%, compared with a participation rate of only 60% for employees in voluntary enrollment plans. Seven in 10 automatic enrollment plans have implemented automatic annual deferral rate increases, up from three in 10 in 2005. Automatic enrollment particularly improves participation rates among traditional non-savers: young, short-tenure and lower-income workers.
The average participant deferral rate rose to 7.1% and the median (which reflects the typical participant) was unchanged at 6%. The aggregate average plan savings rate—including both participant and employer contributions—was 10.4% in 2011. Vanguard’s view is that investors should save 12% to 15% or more. For participants with lower wages, Social Security is expected to replace a higher percentage of income, and so a lower retirement savings rate may be appropriate. For those earning higher wages, Social Security replaces a lower percentage of income, and savings rates may need to be higher.
The median account balances of continuous participants—those with an account balance at both the end of 2010 and 2011—rose by 10%. Eight in 10 of these continuous participants saw their balances rise because of conservative asset allocations (for example, being invested exclusively or predominantly in fixed-income holdings) and ongoing contributions. In 2011, the median participant account balance was $25,550 and the average was $78,296. “It’s important to keep in mind that typical participants are in their mid-40s and saving 10%, with about eight years of tenure with their current employer, and 20 to 25 more years to grow their account,” said Steve Utkus, head of Vanguard’s Center for Retirement Research and co-author of the report. “Furthermore, their retirement plan assets will likely be complemented by Social Security benefits and other savings, including assets in other employer plans, a spouse’s plan, or personal savings accounts.”