Automatic enrollment signed millions of American workers up for a retirement plan, creating a sense of progress that may not reflect the underlying numbers. 

Vanguard’s How America Saves report, covering nearly five million workplace retirement accounts through 2025, suggests the picture is more complicated than the headlines imply.

Participation across Vanguard-administered plans reached a record 86% of eligible employees in 2025, with automatic enrollment driving that rate to 94%. The average total contribution rate also reached a record 12.1% of pay, combining worker deferrals and employer matching across those plans.

Those records rest on default contribution settings that most employees never chose and have never revisited since they were hired.

Nearly 4 in 10 plans still default workers at 3% or below

Nearly 4 in 10 automatic enrollment plans, or 38%, still default employees at a contribution rate of 3% or below, the Vanguard report showed. 

Vanguard recommends a combined total of 12% to 15% of pay, including employer matching, a threshold more than triple the most common default rate.

The share of plans starting workers at 4% or higher has climbed from 27% in 2005 to 62% in 2025, but gains have stalled since 2023. A worker who contributes 3% and receives the average employer match of 4.7% of pay would reach a combined rate of just 7.7%. 

That rate falls well below the 12% floor. For a worker earning $90,000, the shortfall amounts to about $3,870 per year.

Compounded at a 7% average annual return over 30 years, that annual gap grows to roughly $365,000 in foregone retirement savings, according to standard time-value-of-money projections.

Vanguard Managing Director of Workplace Solutions Lauren Valente said in a June 2026 press release that while the industry’s progress on plan design has fundamentally expanded access to retirement savings, the system must continue strengthening defaults to close remaining gaps.

<strong>Continuing to strengthen the system means helping Americans manage short-term financial pressures while staying on track for long-term retirement security and expanding solutions that support them at every stage of their journey</strong>.

The Vanguard report data reinforces that view, with 22% of participants deferring less than 4% of their income and only 25% saving more than 10%.

401(k) auto-escalation caps create a second ceiling on retirement savings

Automatic annual deferral increases now appear in 71% of automatic enrollment plans, the highest adoption rate in the report’s 25-year history. The report found that 40% of those plans cap annual increases at 10% of pay, affecting 43% of participants enrolled in the feature.

A worker who starts at 3% and climbs by 1% per year would hit a 10% ceiling after seven years in the same plan.

Combined with the average employer match, that ceiling produces a total rate of about 14.7%, barely clearing the bottom of Vanguard’s recommended range.

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Vanguard recommends that plan sponsors set escalation ceilings where participants save at least 15% of pay, including employer contributions, the report noted. 

A 10% cap falls short of that benchmark, and only one in three plans currently set caps between 11% and 15%, the report showed.

The share of participants saving at target levels has risen by only four percentage points since 2021, from 47% to the current 51%.

That pace suggests current plan designs alone are not narrowing the adequacy gap fast enough for the millions of workers approaching retirement.

T. Rowe Price confirms the savings gap widens without auto-increase

T. Rowe Price’s 2026 Reference Point analysis, covering more than two million active plan participants, reinforces Vanguard’s findings on default contribution gaps. 

Plans pairing auto-enrollment with an opt-out auto-increase kept deferral rates at the level of voluntary enrollees, who tend to contribute at higher levels, the firm found.

Plans lacking that escalation feature produced consistently lower deferral rates among defaulted participants than among those who enrolled voluntarily, the data showed. 

The gap was widest among older workers who switched jobs, with participants over age 50 in plans pairing auto-enrollment with opt-out auto-increase contributing an average of 8% in their first three years. 

Peers with 10 or more years at the same employer contributed 12%, showing how a job change can reset saving behavior, the firm reported. Loan usage was more than 30% higher in auto-enrollment plans than in voluntary plans, at 21% versus 16%, the analysis confirmed. 

That disparity suggests financial strain runs higher among the broader population that automatic features bring into the retirement saving system, the firm noted.

The two figures Vanguard says shape retirement readiness

The first major indicator shaping retirement readiness is a worker’s current deferral rate plus employer match, measured against the firm’s 12% floor. The second is whether the plan’s escalation ceiling reaches 15%.

Although the above two figures together carry the greatest weight, Vanguard’s 25-year dataset also identifies three plan-design levers that most influence retirement outcomes: the default rate, automatic escalation, and the employer match.

Record enrollment rates have not translated into adequate contribution levels for roughly half of all active participants. That divide between record-high participation and persistent savings shortfalls is the central tension running through all 25 editions of the How America Saves report.

Related: Vanguard flags costly blind spot in 401(k) Roth savings