Each year, Vanguard Group releases its annual review of the state of retirement savings in America, focusing on the 401(k)s, 403(b)s and other defined-contribution plans that allow people to set money aside for retirement, and in many cases defer taxes in the process.
The report, “How America Saves 2018,” is full of data, charts and interesting analytics. What I want to do is highlight a few specifics in the report, but I suggest you download it and spend some time working through all of its geeky goodness.
First, the positive news: Vanguard points out five changes that are plusses for savers and investors:
Participation rates: More people are enrolled in defined-contribution plans;
Portfolio composition: This has improved, as plans have moved away from random fund selection and toward either target-date funds or balanced funds;
Automatic enrollment: Up 300 percent since 2003;
Automatic annual deferral-rate increases: Two-thirds of participants do this;
Account balances: Most have increased substantially.
It also is worth noting the substantial improvement in investor behavior during the past five years. Plan participants trade much less, own less stock in the companies where they work and borrow less against their retirement assets. How much of this is a function of the robust economy during that period, or genuine improvement in how investors conduct themselves is up for debate. But it is indisputably a good thing for these savers.
All of these positives, plus a very cooperative stock market since the end of the financial crisis in 2009, have led to a big uptick in total assets in retirement-plan accounts.