Workers Are Saving Almost What They Should Be for Retirement
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Download the Realtor.com app because you're nearly home. Make it real with Realtor.com. Pro's number one most trusted app based on August 2024 proprietary survey. Over 500,000 new listings every month based on average new for sale and rental listings. February 2024 through January 2025. Here's your money briefing for Wednesday, June 11th. I'm Mariana Asguru for The Wall Street Journal. 15%. That's the share of your annual income that financial advisors recommend goes towards retirement.

Even in an uncertain economy, Americans have now hit a record for how much they're saving: 14.3%. That's according to a Fidelity Investments analysis of the millions of accounts it manages,

So Americans are almost there. 401k savers are just notorious for their ability to stick with the plan or whether they have a plan or not. Not many people cut back on saving. Way more people increased their savings rate than decreased it. Wall Street Journal retirement reporter Anne Turgason joins me to talk about what this tipping point means and what some savers can do if they feel behind. That's after the break.

Isn't home where we all want to be? Reba here for Realtor.com, the pro's number one most trusted app. Finding a home is like dating. You're searching for the one. With over 500,000 new listings every month, you can find the one today.

Download the Realtor.com app because you're nearly home. Make it real with Realtor.com. Pro's number one most trusted app based on August 2024 proprietary survey. Over 500,000 new listings every month based on average new for sale and rental listings. February 2024 through January 2025. Americans are now saving almost as much as they're supposed to for retirement. Wall Street Journal reporter Ann Tergesen joins me to talk about it.

And just how big of a milestone is this for retirement savers? It's something that financial advisors have long recommended that people do is save about 15% of their income annually. That can be 15% doesn't mean that you have to save at all.

Most employees get an employer matching contribution. So the idea is to save 15% combined with any match that you get from your company. And the recent data shows that people are getting very close to that 15% goal on average. And where did 15% come from? Because as the average retirement saver, I see 15% and I'm like, that's tough.

So that's a data point from Fidelity Investments. They're the largest 401k record keeper in the country. They serve about 25,000 employer plans, 401k plans. So it's a snapshot into what Fidelity's own customers are doing on average. You've recently written about how more workers are utilizing 401k plans.

Can you remind our listeners why? In recent years, more people are participating in 401k plans because more employers are automatically enrolling employees in the plans. A lot of people end up in the 401k plan without even having to take any action themselves. And that has really expanded the number of people in these plans. Also, in recent years, more employers are starting 401k plans for reasons that

That include more generous tax benefits from Congress for companies to start up new plans. And also just a growing number of states are mandating that companies provide some kind of retirement savings plan. And if they don't, they can put their employees into a state-run retirement savings program. Your story also references some really interesting data about how retirement savings vary among generations.

Who is saving the most? I think for obvious reasons, it's the people who are closer to retirement, baby boomers and the Gen Xers. Also, people tend to at least have the opportunity to save more after their kids leave home. There are years in which people can catch up. And in fact, Congress has

formally allows people who are 50 or older to make what are called catch-up contributions, which means extra contributions to their 401k plan. If you look at the data, you'll find that it goes in the order of oldest generation to youngest in terms of the oldest generation having the highest savings rate. We saw lots of market volatility earlier this year and 401k balances dropped.

Did that rattle these savers at all? Not really. 401k savers are just notorious for their ability to stick with the plan, or whether they have a plan or not, but they stick with their investments. And in fact, they continue to contribute in general. Not many people cut back on saving. Way more people increased their savings rate than decreased it. And it's

Only 6% changed their investment allocation in the first three months of the year. So generally when you say 401k savers set it and forget it or put their 401k on autopilot, the data really proves that out. People really don't make a lot of changes when the market declines. So let's say someone is on that autopilot and they're below what they'd ideally like to be saving for retirement, especially after our conversation about this 15% being the ideal number.

What are some steps that they could take to get back on track? You know, at any point, you can go in and raise your savings rate if you want. I mean, the separate issue is if you can't afford to do that, then a lot of 401k plans also have something called automatic escalation. So they not only automatically enroll people in the 401k, but they automatically increase their savings rate often by about one percentage point a year until they reach some kind of

cap, like maybe 10%, 12%, whatever. And if your plan has that program, you can just sign up for it. So the idea being that like a lot of people get annual raises and when that annual raise comes through, the employer then can increase their savings rate. So if they're saving 4% this year, you know, that would be bumped up automatically to 5% without them having to do anything. Now, again, that might require you to go in and sign up for that program.

Some 401k plans do that automatically without their workers signing up and other ones require their workers to go in and sign up for that automated increase. But it's a really good way of setting it and forgetting it because even though you might have the desire right now to increase your savings rate, if you can't afford the automatic increase program would take care of that for you at a point when maybe you wouldn't be thinking about it.

That's WSJ reporter Anne Tergesen, and that's it for your Money Briefing. I'm Mariana Aspuru for The Wall Street Journal. This episode was produced by me with supervising producer Melanie Roy. Thanks for listening.

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