Blog: Twenty years of learning how Americans save

June 29, 2021

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John James

John James

While I consider myself to be a futuristic thinker, I've learned that it's really important to understand where we've been before we plan our next steps. That's why I value How America Saves, which for two decades has served as a trusted resource and blueprint for best practices in defined contribution (DC) plan design. This rich data paints a picture of the progress we've made and the trends and opportunities that will guide our future.

The recently released 2021 edition examines plan data from 4.7 million DC plan participants across our recordkeeping business. It captures how plan participants and sponsors reacted to the COVID-19 pandemic. And it shows how world-class plan design helped DC participants stay the course despite a volatile and uncertain 2020. A few data points that stood out for me:

  • Automatic enrollment helped employees save 50% more for retirement than those at companies offering voluntary enrollment.
  • Annual automated deferral increases resulted in participants saving 20—30% more after three years than employees without automatic increases.
  • Participants' increasing use of target-date funds—which offer a risk-adjusted, all-in-one portfolio solution—led to a 75% decrease in extreme equity allocations among participants over the last 15 years.
  • Target-date funds also tamped down frequent trading; 96% of participants holding a single target-date fund did not make a trade last year.

It's gratifying to see that many of the positive trends we've documented over the past 20 yearstrends that fostered a beneficial long-term participant focus—continue to keep participants on a path to reach their financial goals, regardless of the market environment.

More than saving for retirement

Today, more than 100 million Americans are covered by DC plans and industry retirement assets have eclipsed $9 trillion.1 Yet we still have much more to accomplish. We've learned that retirement savings are just one piece of a participant's broader financial picture. Increasingly employees are looking to their employer-sponsored plans for customized advice and solutions that take a more comprehensive approach to financial well-being. And plans are responding, evidenced by the growing number of participants—71% at the end of 2020—offered managed account advice.

How America Saves tells us advice is here to stay. Demand is rising, costs are lowering, and technology is advancing to make advice core to the experience of planning for retirement—and beyond. Personally, I'm thrilled to see the industry fully embrace the power of high-quality, low-cost advice, which can help participants achieve better financial outcomes in every aspect of their lives.

Turning insights to action

Last year, we launched How America Saves: Insights to Action, a supplementary report offering plan design recommendations that can improve participants' outcomes. This year's Insights to Action encourages plan sponsors to focus on four key areas. Combined, these plan design features can meaningfully improve participation and saving rates and keep participants on track for retirement.

  • Automatic solutions—Moving beyond enrollment: To build on the progress already made to better retirement plan participant outcomes, plan sponsors should look beyond automatic enrollment—already used in a majority of plans—and consider other automatic features, such as autoescalation of saving rates.
  • Participant adviceSolving the unique needs of all participants: Advice is the new alpha. By using managed account advice, 7 in 10 participants increased their projected 10-year retirement wealth by an average of 23% net of investment and advice fees. This increase can be attributed to higher expected returns due to increased equity exposure and, for a subset, increased saving rates.2
  • The retiree-friendly plan—Design plans that serve all participants: As more and more employees retire, retirement plan sponsors should consider making their plans a retirement destination, meaning a plan where participants can generate income post-retirement. Participants benefit from fiduciary oversight and institutional pricing. For plan sponsors, the added scale builds bargaining power that can be used to advocate on behalf of the plan. Sponsors can also be confident that they are supporting the complete scope of financial well-being for participants during retirement.
  • Loans and withdrawals—Find the right balance: COVID-19 demonstrated that there is a benefit to giving participants limited access to their retirement savings. But before setting policy, plan sponsors should understand the risks associated with greater access.

Over the last two decades, continued adoption of automatic solutions has increased employee savings and the use of professionally managed allocations. Thoughtful retirement plan designs are helping participants both save for retirement and spend in retirement. The research reported in this 20th anniversary year edition of How America Saves shows just how far we've come. The lessons learned will fuel our next steps as we continue to help improve participant outcomes.

1 U.S. Department of Labor, Private Pension Plan Bulletin Historical Tables and Graphs, January 2021; and Investment Company Institute, Quarterly Retirement Market Data, Fourth Quarter 2020, March 2021.

2 Cynthia A. Pagliaro, 2018. The Value of Managed Account Advice. Vanguard research,


  • All investing is subject to risk, including the possible loss of the money you invest.
  • There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
  • Diversification does not ensure a profit or protect against a loss.
  • Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target-date funds is not guaranteed at any time, including on or after the target date.