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Rising 401(k) Contribution Rates, Fewer Plan Loans, Show a Return to Normal

Auto-enrolling and raising contributions annually have increased account balances

An older couple looking at a document on a laptop.

The average annual 401(k) savings rate for plan participants reached a new high of 9.3 percent of workers' earnings this year, according to new research.

"It's encouraging to see a continued improvement of retirement savings rates," said Kevin Barry, president of workplace investing at Fidelity Investments.

The firm's analysis, released in August and based on 23,600 Fidelity-administered corporate defined contribution plans as of June 30, 2021, showed workers starting to feel more stability and a sense of normalcy, compared with the results of participant surveys Fidelity conducted last year.

Improved sentiment among 401(k) savers was reflected in these survey findings:

  • The percentage of outstanding 401(k) loans is at a record low. Less than 1 in 5 (17.5 percent) of plan participants had an outstanding loan from their 401(k) in the second quarter of 2021, a record low. "While some workers may still have to tap their 401(k) to help address a financial challenge, the long-term trend shows decreasing loan use," the report noted.
  • Fewer people are making changes to the asset allocation. Only 5.3 percent of 401(k) savers made a change to their asset allocation in the second quarter, the lowest percentage since the fourth quarter of 2019.

Over the last year, more than 1 in 3 (38 percent) of 401(k) savers increased their savings rate, the survey found, while 7 percent of workers decreased their savings rate.

The average 401(k) balance increased to $129,300 in the second quarter of this year, up 4 percent from the first quarter and an increase of 24 percent from a year ago, Fidelity reported. Average account balances for 403(b) plans, the savings plans more commonly used by charitable groups and educational institutions, are lower than 401(k) balances but showed similar improvements from last year.

Average Retirement Account Balances

 Q2 2011Q2 2020Q1 2021Q2 2021
401(k) plans$73,000
403(b) plans$56,300

Source: Fidelity's Q2 2021 Retirement Analysis.

Long-Term Participation Pays Off

The overall average balance for those who've been in their 401(k) plan continuously for 10 years crossed the $400,000 threshold for the first time, reaching $402,700 in the second quarter of 2021, Fidelity reported. Among female investors, the average 10-year continuous 401(k) balance reached $324,700 in the second quarter.

Automatic Features Drive Up Participation

Vanguard Investments How America Saves 2021 report, released in August, also shows rising participation rates and increasing average account balances compared with prior years.

The findings are derived from Vanguard's client database of 1,700 employer-sponsored defined contribution plans, of which 9 out of 10 are 401(k) or 403(b) plans.

The chart below shows that more plan sponsors have been adding automatic features and a Roth option to their plans over the past 15 years.

Plan Design Changes

Plan Feature





Plans with automatic enrollment
Plans offering Roth contributions --42%60%74%
Plan-weighted participation rate*
Automatic enrollment participant-weighted participation rate**
Average account balance $67,856$79,077

* The plan-weighted participation rate is calculated to indicate the participation rate in the average plan.
** The participant-weighted participation rate considers all employees as if they were in a single plan.
Source: How America Saves 2021, Vanguard. All data as of Dec. 31, 2020.

"Adoption of automatic features—particularly automatic enrollment—has been one of the primary reasons we have seen an increase in participation rates," said report lead author Jeff Clark, a member of the advanced analytics team in Vanguard's strategic retirement consulting group.

Plans with automatic enrollment had a 92 percent participation rate, compared with a participation rate of 62 percent for plans with voluntary enrollment, he noted.

"Automatic enrollment also leads to higher total saving rates, which include both employee and employer contributions," Clark added. Vanguard's analysis, he noted, shows that last year:

  • Employees in plans using automatic enrollment saved an average of 10.7 percent of their annual salary, compared with 6.8 percent for those using voluntary enrollment.
  • Employees who worked for firms with automatic enrollment saved over 50 percent more for retirement in 2020 than those employed at firms with voluntary enrollment.

Value of Automatic Contribution Increases

David Stinnett, a principal who heads Vanguard's strategic retirement consulting group, added: "As impressive as the stats are right now—the progress we've seen—the fact of the matter is if you're going to implement automatic enrollment, you really need to do that in tandem with automatic increase," which raises employees annual contribution rates by 1 percent or 2 percent every year, capped at around 15 percent of employees' earnings—or even 20 percent or higher, if the workforce is predominantly made up of high earners—unless employees opt out of the increase.

"Participants enrolled in a plan with automatic increase save, on average, 20 percent to 30 percent more after three years in the plan, compared with participants in an automatic enrollment plan that does not automatically increase participants," Stinnett noted. 

He added, "Because we believe retirement success hinges on participants reaching a target savings rate of 12 percent to 15 percent as soon as possible, an automatic increase feature—coupled with automatic enrollment [with a default savings rate] at least at the employer-match level—is a very powerful way to help participants reach their target."

Related SHRM Articles:

401(k) Plan Match Formulas and Automatic Features Add Value for Participants, SHRM Online, July 2021

401(k) Savings Rates Are Up, and SECURE Act May Push Them HigherSHRM Online, January 2020

[Want to learn more? Join us at the SHRM Annual Conference & Expo 2021, taking place Sept. 9-12 in Las Vegas and virtually.]

[Small businesses can find offering a retirement plan to be daunting. SHRM is offering a program through Raymond James that may help. Visit to learn more.]


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