The Average 401(k) Savings Rate Has Risen to a New Record

June 5, 2024

Retirement savers are saving more in their 401(k) plans, and automatic enrollment and employer matching contributions are pushing the national average closer to levels experts recommend.

During the first quarter of 2024, the combined 401(k) savings rate reached 14.2%, according to a quarterly analysis performed by Fidelity that looked at nearly 26,000 corporate plans that include roughly 24 million participants.

The 14.2% figure is a combination of employee deferrals, which averaged 9.4% in Q1, and employer contributions, such as matches and profit sharing, which amounted to 4.8%.

Together, the figure is the highest on record, and close to the 15% savings rate that financial planners generally recommend as a savings target. The 15% recommendation is a general rule of thumb that may not apply to everyone, and the right retirement savings rate will depend on age, expected retirement date, projected Social Security income, cash flows, and needs. A young worker just starting out may not be able to afford to save more than 10%, while a worker in their 50s and nearing retirement may need to save more than 20% to ensure a well-funded retirement.

Regardless of how much an employee needs or is able to save, workers should at least contribute enough to get the full company match. Fidelity’s analysis found that the most common matching formula is based on a 5% contribution rate with a 100% employer match on the first 3% of employee contributions and a 50% match of the next 2%. 

Over the years, both the individual savings rate and company contributions have continued to climb. Many companies now automatically enroll employees in their 401(k) plan and require employees to opt out if they do not wish to particiapte. While the default contribution rate for such auto-enrolled 401(k) plans was 4.1% last quarter, Fidelity’s research found that nearly 40% of auto-enrolled plans started employee deferrals at 5% or higher.

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