Automatic enrollment in 401(k) plans is now common, but the default contribution rate selected at enrollment may have a greater impact on retirement savings than later investment choices.
Vanguard’s 25th annual How America Saves report, published in June 2026, tracked the retirement behavior of nearly five million defined contribution plan participants.
Participation reached a record 86% among eligible employees, the highest rate in the study’s 25-year history, driven by automatic enrollment.
The report exposed a tension between how many workers are enrolled and how much they are setting aside. For many workers, the gap begins with a single setting they never chose and may never have revisited since their first day on the job.
Vanguard’s 401(k) report reveals a split in default contribution rates
Automatic enrollment has changed retirement saving since the 2006 Pension Protection Act first encouraged employers to adopt the feature across their plans.
By the end of 2025, 61% of Vanguard plans had adopted automatic enrollment, including 79% of plans with at least 1,000 participants, the firm reported.
Among those plans, 62% now cover employees who have chosen a deferral rate of 4% or higher, up from 43% in 2015, Vanguard’s report showed.
That progress still leaves roughly 38% of auto-enrollment plans starting new workers at a deferral rate of 3% or below, the data showed.
For a worker earning $65,000 who is defaulted at 3%, the annual employee contribution comes to $1,950 before any employer match is included.
Even adding the record-high average employer match of 4.7%, that worker’s combined rate lands near 7.7%, well below Vanguard’s recommended 12% to 15% range.
What Vanguard’s 12% to 15% savings target means for 401(k) participants
Vanguard has long recommended that workers aim for a combined savings rate of 12% to 15%, covering both their deferrals and any employer contributions.
Participants’ average combined savings rate reached a record 12.1% in 2025, rising nearly two percentage points over the prior decade, Vanguard reported.
The median total rate, a more revealing measure because it reflects the typical saver rather than high earners pulling up the average, sat at 11.6%.
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Only 51% of participants met the 12% to 15% target or hit the statutory maximum in 2025, up from 47% in 2021, Vanguard reported.
The average employee deferral rate climbed to 7.6% of pay last year, while employer matching contributions reached a record average of 4.7%.
Those gains reflect a decade of incremental improvement, but they confirm that the typical worker is not yet deferring enough to close the gap.
How auto-escalation helps close the 401(k) default rate gap
One feature designed to push workers past a low starting rate is automatic escalation, which raises a participant’s deferral by 1% to 2% each year.
About 71% of auto-enrollment plans on Vanguard’s platform included this feature in 2025, and 45% of all participants increased their savings rate during the year, the data confirmed.
31% of participants got a bump through annual automatic escalation, and another 14% raised their rate on their own.
The combination of higher default contribution rates, automatic escalation, and strong employer matches has driven the record savings rates, the report noted.
A worker who defaulted at 3% with a 1% annual escalation would need five years of increases just to reach an 8% personal deferral rate.
Combined with a typical 4.7% employer match, that timeline still leaves the worker short 15% for half a decade after enrollment.
Fidelity’s first quarter 2026 data confirms the 401(k) savings pattern
Fidelity Investments reported a similar trajectory in its first quarter 2026 retirement analysis, tracking more than 54 million IRA, 401(k), and 403(b) retirement accounts.
The total average savings rate for 401(k) participants at Fidelity reached 14.4%, with the average employee contribution rate hitting a record 9.6% in that period.
Sharon Brovelli, president of Workplace Investing at Fidelity Investments, noted in the firm’s first quarter 2026 retirement analysis that participants who kept contributing through market volatility were positioning themselves for stronger outcomes as retirement nears.
While it can be tempting to make changes to retirement savings during market volatility, it is positive to see participants stay the course with their contributions, an approach that will ultimately strengthen outcomes as retirement nears
Fidelity has shown that consistency through a down quarter tends to pay off later, not right away.
Contributions that continue through a drawdown are the ones that benefit most when the market recovers, a mechanism that rewards inaction over reaction in a way that few other financial decisions do.
What 401(k) default contribution rate signals about retirement readiness
The picture emerging from both Vanguard and Fidelity’s data has a direct implication for workers who were automatically enrolled and never adjusted their contribution rate.
The default contribution rate, any built-in automatic escalation, and how much the employer matches are the three plan-design levers that largely determine whether a worker’s retirement savings stay on track, according to Vanguard.
“More than 25 years of data and insights make it clear, strong default contribution options and automatic features have made saving for retirement more accessible and effective for more Americans than ever before,” Lauren Valente, Vanguard’s Managing Director of Workplace Solutions, said in announcing the 2026 report.
Vanguard’s 25-year dataset leaves one question unanswered: Are participants still being held to the contribution rate they were given at enrollment, even if they have never revisited it?
Related: Vanguard says one gap could risk decades of savings
