Your 401(k) is up, and a new report shows increased savings. But Americans need to do more

Core Insights - Vanguard's annual report indicates that while Americans are saving more for retirement, many still rely heavily on Social Security, highlighting a need for increased savings [1][10] Group 1: Savings and Participation Rates - The average total return rate for 401(k) participants in 2023 was 18.1%, marking the best year since 2019 [2] - Participation in 401(k) plans reached record highs, with 59% of plans offering automatic enrollment, leading to a 94% participation rate in those plans compared to 67% for voluntary enrollment [2][3] - The average participant deferred 7.4% of their savings, with total contributions averaging 11.7% when including employer contributions [3] Group 2: Investment Preferences - Participants showed a strong preference for equities, with 74% of contributions directed towards stocks, and 64% of contributions going into target-date funds [3] Group 3: Account Balances - The average account balance for Vanguard participants was $134,128, while the median balance was significantly lower at $35,286, indicating a disparity driven by a small group of high-balance investors [5] - For those aged 65 and older, the average account balance was $272,588, but the median balance was only $88,488, raising concerns about retirement preparedness [7] Group 4: Retirement Income Analysis - A typical annual drawdown of 4% from a median balance of $88,488 yields only $3,539 annually, combined with Social Security benefits of approximately $20,268, leading to a total of about $33,065 per year [8][9] - Only 57% of retirees have a tax-deferred retirement account, and 56% receive pension income, which significantly affects their financial well-being in retirement [9] Group 5: Recommendations for Improvement - To enhance retirement security, Americans need to save more, as only 14% of participants contribute the maximum allowed amount of $22,500 per year [10] - There is a need for increased investor education, especially among higher-income earners, as only 53% of those earning over $150,000 maxed out their contributions [10]