The average 401(k) savings rate recently hit a record — how to know if you’re on track

“The 15% is just a goalpost,” with the understanding that everyone’s situation is different, said Mike Shamrell, vice president of thought leadership for Fidelity’s Workplace Investing. 

The right retirement savings rate depends on your age, expected retirement date, cash flow, projected Social Security income, pensions and retirement plans, among other factors.

However, “if you can’t reach that 15%, at least try to contribute [enough] to get your full company match,” Shamrell said.

The most common match formula for Fidelity plans is based on a 5% contribution rate with a 100% match on the first 3% of employee deferrals and a 50% match on the next 2%. In other words, if 5% is $100, the company would match $80, Shamrell said.

“We have target savings rates of 10% to 30% depending on the household,” said certified financial planner Andrew Herzog, an associate wealth advisor at The Watchman Group in Plano, Texas.

For example, a 20-year-old barely making ends meet may struggle to save 10%, whereas a 50-year-old couple may need to stretch their savings rate to 20% to reach their target retirement dates, he said.

Over the years, both the individual savings rate and company contributions have continued to climb, said Shamrell with Fidelity. 

Many companies automatically sign eligible employees up for the 401(k) plan, leaving them to opt out if they don’t want to participate. While the default contribution rate for such auto-enrolled 401(k) plans was 4.1% last quarter, nearly 40% of auto-enrolled plans started employee deferrals at 5% or higher, according to Fidelity.

Automatic 401(k) contribution increases have also boosted savings rates, according to Shamrell.

More than 33% of plan participants increased 401(k) contributions at the end of 2023 — and about three-quarters of those increases were automatic adjustments, he said.  

About 78% of 401(k) plans that auto-enrolled employees also had auto-escalation in 2022, according to a yearly survey from the Plan Sponsor Council of America.

After combining those factors, “you start seeing some really positive trends in terms of savings rates,” Shamrell added.