More Employees Are Enrolling in 401(k) Plans, but Contribution Rates Remain Low

Key Takeaways

• A record 86% of eligible employees are saving in Vanguard 401(k) plans, helped by automatic enrollment, but participation alone isn’t enough.

• The most common default contribution rate is 3% of pay, and many workers may need to increase that rate to save enough for retirement.

• Vanguard recommends saving 12% to 15% of pay including employer contributions, yet only 51% of participants met that mark or maxed out in 2025.

More people are saving for retirement through their 401(k), according to new data tracking roughly 5 million participants in Vanguard’s plans. However, there is a caveat: Many aren’t contributing enough to build sufficient retirement savings.

Getting employees enrolled has been the industry’s big focus, while default contribution rates often get less attention.

Auto-Enrollment Pushes 401(k) Participation to 86%

Across Vanguard’s workplace plans, a record-high 86% of eligible employees are saving for retirement.

Automatic enrollment appears to be the driver. Instead of requiring employees to opt in to workplace plans, automatic enrollment signs them up by default unless they opt out.

In 2025, 61% of Vanguard plans used automatic enrollment, up from around 15% in 2010. Within those plans, participation reached 94%, compared with 64% for plans that required employees to opt in themselves.

This gap is even wider among certain demographics. For workers earning under $15,000, participation was just 16% with voluntary enrollment, compared with 80% with automatic enrollment. For workers under 25, it was 24% versus 90%.

Workers earning $150,000 or more appear less likely to need to be pushed into saving. Among that group, the gap narrowed to 89% with voluntary enrollment versus 98% when auto-enrolled.

Why This Matters

Don’t assume you’re on track for retirement just because you’re enrolled in a workplace plan. Check your contribution rate to make sure you’re saving enough for your goals.

Many Workers Start With a 401(k) Contribution Rate of Just 3%

Saving for retirement is important, but so is saving enough. With automatic enrollment, plans decide in advance what percentage of your pay gets set aside. Many set a low rate, presumably to make it manageable and reduce the risk of people opting out.

In 2025, about a third of Vanguard plans with automatic enrollment defaulted new participants to 3% of pay, making it the most common default rate in Vanguard’s data pool.

There are signs of progress. Sixty-two percent of plans chose a default of 4% or higher in 2025, up from just 27% in 2005. Thirty-one percent defaulted at 6% or more, more than 50% higher than in 2016. And 71% of plans with automatic enrollment now also automatically increase contribution rates every year.

Nevertheless, those default contribution rates fall short of what Vanguard considers adequate. The firm believes a typical participant should aim for a total contribution rate, including employee and employer contributions, of 12% to 15% of pay. Fidelity, meanwhile, puts the target at 15%. Even with a typical employer contribution added, most default rates won’t get workers to those levels.

How to Tell Whether You’re Saving Enough in Your 401(k)

In 2025, 51% of participants met Vanguard’s 12% to 15% threshold or were contributing the maximum allowed by the IRS.

Vanguard also measures “saving effectively” against a target that scales with earnings, on the basis that lower earners need to save less because Social Security replaces more of their income. By that measure, 62% of participants earning under $50,000 are saving effectively, compared with just 44% of those earning $50,000 to $100,000, and 52% of higher earners.

To see where you stand, check your plan statement or online portal. If you want to compare against Vanguard or Fidelity’s recommendations, you’ll need to look at your total contribution rate, including what you and your employer contribute, because that’s what those benchmarks are based on.

If you’re still contributing at a low default rate or your total is below Vanguard and Fidelity’s suggestions, consider increasing the percentage of your pay you contribute to your workplace plan.

These percentage recommendations should be treated as guidelines rather than strict rules. The exact percentage required to retire comfortably varies by person. Key variables include when you start saving, when you plan to retire, how much you’re likely to need to live on in retirement, and whether you have other retirement income sources beyond your 401(k) and Social Security.

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