Average 401(k) Savings Rate Rises to 12.7% in 2023, Industry Survey Reveals

Understanding the Average 401(k) Savings Rate

The average 401(k) savings rate, which includes both employee deferrals and company contributions, has seen a continuous rise in recent years, according to an industry survey. In 2023, the average combined savings rate reached 12.7%, marking an increase from 12.1% in 2022. Employees deferred 7.8% of their pay, while companies added a 4.9% contribution, as per the annual survey by the Plan Sponsor Council of America.

Comparison of Savings Rates Across Different Firms

Comparatively, Vanguard reported the average combined savings rate at an estimated 11.7% for 2023, a figure that remained unchanged from 2022. Fidelity Investments, on the other hand, estimated the combined savings rate to be 14.1% as of September 30, 2024.

How Much Should You Save in Your 401(k)?

Vanguard recommends saving 12% to 15% of your income every year, inclusive of your employer’s contribution, to meet your retirement goals. Fidelity sets the combined savings benchmark at 15%. It’s encouraged to contribute enough to benefit from the full match provided by your company, ensuring your savings grow substantially over time. More than 80% of plans included a matching contribution in 2023, as per the Plan Sponsor Council of America report.

Upcoming Changes in 401(k) Contribution Limits

In 2025, the 401(k) maximum employee deferral will increase to $23,500, up from $23,000 in 2024. The 401(k) catch-up contribution will stay at $7,500 for workers aged 50 and above, but it will rise to $11,250 for investors between 60 and 63 years old. To prepare for these changes, now is a crucial time to review and possibly increase your 401(k) deferrals.

Usage of 401(k) Plans

According to Vanguard’s annual report, only 14% of employees maxed out their 401(k) plans in 2023. However, an estimated 15% of workers with the option made catch-up contributions.

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