America's retirement accounts are growing, but not fast enough

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America’s retirement accounts are growing, but not fast enough.

Vanguard has released its annual How America Saves 2019 report. It’s a snapshot of the state of retirement in America that focuses on defined benefit accounts, which are mostly in the form of 401(k)s.

Here’s the good news:

1. Despite the market downturn in 2018 (the S&P 500 was down about 6%), the average defined contribution plan last year increased 4%, largely because participants were saving more. The increase counted only those who also had accounts in 2017, not new accounts.

2. More Americans have retirement accounts: 100 million Americans are now covered by defined contribution accounts, most of it in 401(k)s. Assets are growing and are now in excess of $7.5 trillion. Vanguard is among the biggest, with $1.4 trillion in assets under management in direct contribution accounts.

3. Automatic enrollment in retirement plans is increasing. Auto-enrollment is a critical component in improving retirement savings rate. At year-end 2018, 48% of Vanguard plans had adopted automatic enrollment and 66% of new plan entrants were enrolled via automatic enrollment.

4. Auto features are encouraging consistent savings. Including both employee and employer contributions, the average 15-year total participant contribution rate (both employer and employee) in 2018 was 10.6%.

Here’s the bad news: the amount of money being saved still seems well short of what is needed. The size of the accounts in 401(k)s in general (not just Vanguard) is very small, particularly for older Americans.

For example, Vanguard’s average defined contribution plan had $92,148, but the median — where half had more and half had less — was only $22,217. The big difference between average and median is due to a small number of “super-savers” who have large account balances that pull the average

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