Saving for retirement in America makes 'dramatic' shift, new report reveals

Vanguard report reveals rising number of US workers of all ages enrolling in savings plans

American workers are receiving some "very encouraging" news about their retirement futures, with one generation, in particular, that’s most set up for success thanks to a "dramatic" shift in behavior, according to a new Vanguard report.

"The good news is all generations are seeing a lift, are seeing an increase across these topics that matter most," Vanguard Strategic Retirement Consulting principal Dave Stinnett told Fox News Digital on Monday. "But we're seeing the biggest lift with younger workers."

The U.S. saw significantly more millennial and Gen Z workers contributing to their savings or retirement plans in 2021 than compared to 2006 primarily due to automatic 401(k) enrollments and target-date funds. Vanguard client participation increased across all age groups as well, rising from 62% in 2006 to 82% in 2021.

U.S. workers are also putting away 40% more capital than they were in 2006, even with inflation costs accounted for.


"What this paper shows is, across all generations, youngest up to the oldest, you've seen a dramatic change for the better in diversified investing in an age-appropriate way," the expert said.

Couple celebrates retirement

The new Vanguard report highlighted "very encouraging" news on the future retirement savings, Dave Stinnett said.  (iStock)

Stinnett pointed out one Bush-era bill that fueled the savings surge and led to more diversified portfolios.

"The Pension Protection Act, at that time, gave plan sponsors the fiduciary protection to implement some of these plan design techniques: automatic enrollment and also defaulting participants into a particular investment, but most often a target-date fund," Stinnett explained.

"Those things had been certainly known and available before then, but the Pension Protection Act gave explicit fiduciary protection to plan sponsors if they wanted to implement this," he continued. "Since then, you've seen a lot of plan sponsors rush to adopt these best practices."

Vanguard’s report further solidifies how automatic enrollments – as opposed to voluntary savings options – incited "a dramatic change for the better" with diversified funding in an age-appropriate way, Stinnett pointed out.

"That's been mainly the result of the popularity of target-date funds, which are almost always the lowest cost investment in the lineup of funds available and are always the most diversified. So that's been a huge part of this paper, too," he said. "We've really kind of solved this problem of portfolio construction errors."

While baby boomers, Gen X, millennials and Gen Z all saw retirement benefits increase, according to the Vanguard report, Stinnett claimed it's Gen Z that’s "best prepared for retirement" than other age groups.

"There was a hypothesis that younger workers, Gen Z and millennials who had lived through these really difficult times, particularly the great financial crisis... that maybe that would alter how they view investing in stocks. And what this data shows is that's not the case, is actually they invest, they have higher equity allocations and their age cohort from earlier years had," the expert noted.

"You're seeing the younger cohort benefiting the most, and all generations are benefiting from these modern plan designs and from defaults. And so the 2021 version, across all of these age cohorts, is better off than the 2006 version, but certainly, younger workers are being impacted the most," Stinnet added.

For those younger workers who have just started contributing to a savings plan, the Vanguard principal recommends taking advantage of a company deferment match and sticking with it.

"Stick with that plan year after year, that's the best thing. It sounds simple, but it's a very, very important thing to do," Stinnett said.


Employers should also pat themselves on the back for producing better-allocated portfolios since 2006, as Stinnett notes they also play a role in setting workers up for retirement success.

"Retirement savings is a long game. If you're able to get it right and get things set up in an optimal way from the start, really, really helpful and encouraging things happen over the course of time," the principal said. "And so I think from a macroeconomic perspective, this should be very, very encouraging about how American workers are set up for retirement for the future."