Who's still falling behind? Vanguard report shows retirement divide despite record participation

Despite record-high participation in workplace retirement plans and a decade of automatic enrollment gains, troubling disparities in savings behavior persist across age and income brackets.

That's according to Vanguard’s latest How America Saves 2025 report, which drew on data from nearly 5 million participants across the plans it administers.

The report shows that while the average deferral rate has reached an all-time high of 7.7%, and participation in auto-enrollment plans now stands at 94%, large swaths of workers – especially those who are younger or lower-income – remain underprepared for retirement.

“Participation rates have generally improved between 2015 and 2024 among demographic groups that traditionally have had lower voluntary participation rates,” the report notes.

But this progress is primarily concentrated in plans that use automatic features. In voluntary enrollment plans, where workers must opt in, participation remains stalled at just 64%. Among those earning less than $15,000 a year, only 31% contribute to their workplace plan, counting both voluntary and automatic enrollment plans.

The numbers are even starker for younger workers: just 25% of employees under age 25 enroll voluntarily – compared with 90% participation under automatic enrollment.

This divergence reflects a broader reality about saving: when left to their own devices to make complex financial decisions, many workers don’t act. But when savings is made the default, participation rises – especially for those least likely to engage otherwise.

For what it's worth, Vanguard says the shift toward "autopilot" plan design – which not everyone is a fan of – has accelerated. Sixty-one percent of the plans it administers now feature automatic enrollment, and 69% include annual automatic increases in employee contributions. Among large plans (5,000+ participants), adoption is even higher at 75%.

These default designs have helped push average total contribution rates in auto-enrolled plans to 12.5%, compared with 11.1% in voluntary plans.

But economic stress could be taking away some of that edge. Hardship withdrawals reached 4.8% in 2024, up from 3.6% the year prior and nearly triple pre-pandemic levels. That uptick underscores the fragility many lower-income participants face, even as markets performed strongly.

“Higher-wage participants may not be able to achieve sufficient saving rates within the plan because of statutory contribution limits,” the report notes. But for lower earners, the issue remains access and participation – not contribution caps.

On top of those gaps, pre- and early retirees are confronted with growing uncertainty about Social Security’s future. With the trust fund now projected to run short by 2034 without legislative intervention, younger and lower-income workers – those most reliant on government benefits – face heightened long-term risk if they fail to accumulate savings early.

Median account balances reflect the widening divide: workers under 25 have saved just $1,948, while those over 55 hold a median of $95,642. Participants earning over $150,000 had a median balance of $221,220, compared to those earning below $30,000 with less than $6,500.

As policymakers expand automatic features through SECURE 2.0 and beyond, advisors may play a growing role in reinforcing early savings behaviors and designing inclusive plan strategies. But the latest data is clear: many Americans still won't save for retirement unless saving is the default.