Perspectives : DC Retirement | May 16, 2023

Putting one foot in front of the other—Making progress

Read time: 8 minutes

Fourth in a series about financial wellness.

Let's start with a little Q&A.

Q. How much should my participants save for their big goals? 

A. As much as they can, of course. And then some more.

That’s a popular opinion in the halls of financial planning. And we agree. Vanguard’s Guide to Financial Wellness states that saving more can be key in making any progress when pursuing a long-term financial goal.

And making progress is exactly what the third pillar of our financial wellness framework is all about.

Progress toward what?

When we think about long-term goals, we’re mostly thinking about retirement, health care, and education—all of which cost money.

And it can be difficult to make progress on these goals when money is being called away for other things, such as debt and unexpected emergencies. But in our framework, once a participant gets their finances under control and they’re prepared for the unexpected, they can begin to make real progress toward the things that really matter in the long run.

Balances matter

Saving for long-term goals may seem daunting and complex to some, but it’s just a matter of building up a balance by increasing saving and taking advantage of compounding. And of course, the more someone saves, the more money they could have for their goals.

Consider the benefits of a larger balance over a smaller one. A hypothetical 20% return on $1 yields $1.20. That’s fine, but not a big deal. But a hypothetical 20% return on $1 million results in $1.2 million. For someone saving for retirement, that extra $200,000 is a big deal.

This chart, which shows the hypothetical savings growth of three separate households, displays how an initial investment, regular contributions, and increases in regular contributions can have a significant impact on account balances over the long term.

Notes: The scenario shown is hypothetical for illustration purposes only; it does not predict or represent any particular investment product or its expected returns. The figure assumes annual returns of 6%. Monthly returns are assumed to be the geometric averages of these values. Contributions are per month and made at the end of each period. Balances reflect the value at the end of each period. The figure does not account for any taxes.

Source: Vanguard.

An account for all reasons

Account balances will change daily because the markets will do what they do. Participants can’t control or predict market movements, and neither can we. But they can control costs—through how much they save and how they invest their savings. A few examples:

  • Retirement. For arguably the largest and most important goal, your defined contribution retirement plan is an incredibly effective way for your employees to save. Contributions are pre-tax and employer contributions can help increase savings.

Further, encourage plan participants to consider a visit to our My Financial Wellness experience. Those who explore the guides and action plans within the experience are nearly 50% more likely to increase how much they save, which can lead to a larger balance in the long run.

Source: Vanguard, 2023.
  • Health care. Retirement can be a rosy time, full of relaxation and sunshine—if one is healthy enough to enjoy it. Still, 30% of workers are concerned about running out of money for health care while in retirement.1 However, a participant in a high-deductible health plan can save in a health savings account (HSA) to help cover medical costs.

HSAs provide a triple tax-advantage: Money goes in pre-tax, can grow pre-tax, and comes out tax-free provided it’s used for qualified medical expenses. If a participant is older than 65, they can use the money penalty-free for anything. However, nonqualified withdrawals—money used for things other than qualified medical expenses—will be taxed as a traditional IRA would be.

  • Education. Higher education and how to pay for it is top of mind for many parents, which is totally understandable with the consistent increases in college tuition year after year. Good news for the college-bound: 529 plans are designed to help cover the costs of education.

In a 529 plan, money is contributed pre-tax and can be withdrawn tax-free if it's used for qualified education expenses. For many parents, a 529 plan could be an A+ method for college saving, yet Nebraska’s NEST 529 College Savings Plan reveals that 52% of savers are unfamiliar with them. (2020 College Savings Survey, Nebraska State Treasurer’s Office, 2020.)

One of the best ways to maintain financial wellness is to work with a partner you trust. That’s why our financial wellness offer includes relationships with some of the best third-party providers in the business. We add their expertise to our own so your participants can get top-notch assistance with health care planning through HealthEquity and college saving with Candidly.

Some added flexibility

Tax-advantaged accounts offer many cost-saving benefits to savers. But saving for long-term goals doesn’t begin and end with these types of accounts. And not all goals are big ones. Taxable accounts can be ideal for shorter-term goals with conservative investments to help preserve savings, intermediate goals like a car or house down payment, and even long-term goals for when contribution limits are met in tax-advantaged accounts. Plus, taxable accounts can provide tax diversification to help minimize tax impacts when money is withdrawn.

The road to financial wellness continues …

Retirement, health care coverage, and education are life-changing goals with benefits that can outweigh the effort it took to achieve them. But making progress toward these goals is just one element of total financial wellness. For other tips on achieving—and maintaining—financial wellness, explore our financial wellness library.

Vanguard’s guide to financial wellness
The comprehensive guidebook for helping anyone who wants to know what it means to be financially well and how to get there.

The path to financial wellness starts here
Introducing the three key pillars of our financial wellness framework.

Tools to help your participants shrink high-interest debt
Strategies to help your participants control spending and pay off debt.

Are your participants expecting the unexpected?
How to avoid spending and income shocks that can deplete savings.

1 Employee Benefit Research Institute, 2022.


  • All investing is subject to risk, including the possible loss of the money you invest. 
  • For more information about any 529 college savings plan, contact the plan provider to obtain a program description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. If you are not a taxpayer of the state offering the plan, consider before investing whether your home state or that of the designated beneficiary’s offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.
  • Vanguard Marketing Corporation serves as distributor and underwriter for some 529 plans.
  • Student loan debt services are provided by Candidly. Candidly is not affliated with The Vanguard Group, Inc., Vanguard Marketing Corporation, or any of their affliates. The student loan debt services do not provide investment advice or recommendations, but rather student loan debt management guidance and education.
  • When taking withdrawals from a tax-deferred plan before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax. Nonqualified withdrawals from a health savings account may be subject to taxes and a 20% federal penalty tax.