Insights From How America Saves 2014

Vanguard produces a comprehensive study every year of the 401k-type plans it administers. The study includes 3 million people. The large sample makes it reflective of the population as a whole. I’m noting down the bits I found interesting in the latest 97-page report.

Employer Contributions

Only 3% of participants don’t get a match or any employer contribution at all (p. 13). If your employer doesn’t contribute, hopefully it’s making up for it in other ways. Otherwise why work there? Among those who receive a match, 28% receive a match of 5% salary or more (p. 14). My employer matches 4%.


33% of employees don’t participate even though 95% would receive a match (p. 23). It’s not just low-paid employees. 12% of those who earn $100k+ don’t participate.

Higher Income Drives Higher Contributions

Participants with a higher income contribute more, not just in dollars but also as a percentage of income. Those who earn $30-50k contribute 5.6% on average; those who earn $100k+ contribute 8.4% on average (p. 31). 47% of those who earn $100k+ have at least a 15% savings rate when the employer contributions are also included; the same is true for only 19% of those who earn $50k-$100k (p. 36).

6% of participants who earn $75-100k max out the annual employee contribution ($17,500 in 2014). That number becomes 36% — a 6x jump — among those who earn $100k+ (p. 31). If your income is above $100k and you are not maxing out your 401k, you are behind the curve.

Access to After-Tax Contributions

4 in 10 have access to after-tax non-Roth contributions (p. 32). This is very useful in putting extra money into a Roth account when it’s combined with an in-service rollover. Unfortunately I’ve never been among the 4 in 10. If you work for a large, long-established company, check to see whether you can make after-tax, non-Roth contributions and whether those after-tax, non-Roth contributions can be distributed while you still work there. Most plans that allow the former also allow the latter.

Roth 401k and Roth 403b

I’m against contributing to Roth 401k. Most people also figured it out. In plans that offer Roth 401k contributions, only 13% of participants contribute to Roth 401k (p. 33). There isn’t much difference at different income levels.

Number of Investment Options

On average participants have access to 18 investment options but they only use three (p. 47). More than 80% of the participants use five or less (p. 53). That’s certainly the case for me. I use two.


The media like to portray the average investors as a herd driven by the market climate buying high and selling low. It’s really not the case for 401k participants. Only 10% of participants made any trades in 2013 (p. 74). In a year when stocks went up 30%, 3 million participants as a whole only moved 0.2% more into stocks.

Not only do people not trade. Many don’t even bother to look at their accounts online. 30% never registered for online access (p. 94). 40% of participants never contracted Vanguard in 2013 (logging into account counts as a contact).


The report made a mistake of saying the loan interest is double-taxed (p. 81, see 401k Loan Double Taxation Myth). 18% of participants have a loan. The loan balance is on average only 10% of their account (p. 82). The report noted borrowing a small percentage of their account is much better than not contributing to begin with.

Cash Out

28% of those who terminate choose to cash out their accounts (p. 89). However, those tend to be smaller balances. Half of the accounts with less than $1,000 are cashed out (p. 91). In dollar terms, only 3% of the money eligible to be cashed out is actually cashed out (p. 92). The rest either stay in the plan or is rolled over.

If you’d like to read the full report, get it here: How America Saves 2014, Vanguard Institutional

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  1. Jay says

    Regarding your question as to why one would work somewhere that offers no match, keep in mind the field in which one is working. In the private, non-profit sector, I believe matches are rare. I don’t get one. I used to have a modest pension, but that’s currently closed and it’s unknown if it will ever reopen. But, after 25 years of private, non-profit work, I don’t see transitioning to another area as realistic.

    • Harry Sit says

      That’s means the employer is already making it up for you in other ways (familiarity, employability, cause, …).

  2. KD says

    Great insights! On the whole, I believe, employees in the US save well as an aggregate after taking into account marginal utility of the marginal dollar earned. That in itself does not guarantee “comfortable” retirement but I am sure most folks will not be destitute or public charges. Faced with lower income in retirement, many folks do adjust their standard of living. Most personal finance gurus, advisers, article authors and economists discount this aspect quite a bit and keep on drumming about how folks are not saving enough. Enough for what is the million dollar question, ain’t it?

  3. D says

    Really interesting highlights. I am very surprised that 4 in 10 can do after-tax contributions. I wonder other providers are similar or if perhaps Vanguard prices the servicing cost in a way that has greater numbers of employers offering it. Mine, through Fidelity does not, though I know other Fidelity plans do have it.

    I am pleasantly surprised to see the maxing out % for the >100K types is pretty healthy.

    • Harry Sit says

      I think technically all major service providers can support it without much incremental cost. Whether a plan offers it depends on the age and size of the plan for the most part. Before safe harbor provisions became available, when highly compensated employees were limited to a low cap, their extra savings were put in as after-tax contributions. Although it’s no longer necessary to do so when a plan can just use a safe harbor, once a plan offered after-tax contributions, it continues to offer it. New plans established after safe harbor provisions and Roth 401k became available don’t see any need for after-tax contributions.

  4. Mark Zoril says

    I am responding to your comments in today’s e-mail roundup. On 401k distributions, you are correct. Early access, or leakage, is, from my experience,is not the problem it is made out to be. I have been an adviser to middle class people for going on 20 years now. I have rarely seen people withdraw significant amounts, their withdrawals were relatively small and they were rarely glib about it either. Many of the people that reach this conclusion are policy types who, I don’t believe, have been interacting with regular people planning for their future.

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