Vanguard: DC Balances Hit New Highs in 2025

Plan design and participant behavior trends that worked well for defined contribution participants in 2024 continued into 2025, according to a preview of Vanguard’s “How America Saves.” The full version of the annual “How America Saves” report is scheduled to be released in June.

Last year, the average participant account balance increased by 13% year-over-year, hitting a record high of $167,960 on December 31, 2025. Vanguard reported that 45% of participants increased their deferral rates in 2025, either on their own or as part of an automatic annual increase.

As of year-end 2025, 61% of Vanguard plans permitting employee-elective deferrals had adopted automatic enrollment, a level that remained steady year-over. Use of automatic enrollment continued to grow, as a record 79% of plans with at least 1,000 participants implemented the feature in 2025, up 1 percentage point from 2024.

Similarly, 62% of plans with auto-enrollment defaulted their employees into the plan at a contribution rate of at least 4% of salary, up from 61% that did so in 2024. Additionally, 71% of plans with auto-enrollment included an automatic escalation feature that increased participants’ deferral rates.

The proportion of participants who invested their balances in professionally managed allocations—including target-date funds—remained strong this year, reaching an all-time high of 69%, up from 67% that did so in 2024.

Professionally managed investments are typically more diversified than those made by participants on their own: 61% of participants invested in a single target-date or a balanced fund, while 7% used a managed account service. The proportion of participants using a professionally managed asset allocation has increased by 50% over the past 10 years, according to Vanguard’s data.

Only 5% of participants managing their own investments’ traded assets last year, consistent with 2024’s record low. Participants investing only in TDFs, who benefited from automatic age-appropriate equity allocations and ongoing rebalancing, were four-to-five times less likely to trade than other participants, according to the report.

Vanguard’s report stated that participants were “generally resilient” and stayed focused on their long-term financial goals in 2025, despite a few signs of financial stress among certain workers.

At the end of 2025, 13% of participants—the same as in 2024—had a loan outstanding. Overall, hardship withdrawal activity increased modestly over the year, with 6% of participants initiating a withdrawal in 2025, up from 5% who did so the year prior.

Vanguard attributed the modest increase to the relative ease of taking a hardship withdrawal made possible by the advent of self-certification through the SECURE 2.0 Act of 2022. The optional provision, which allows the administrator of a 401(k), 403(b) or 457(b) plan to rely on the employee’s self-certification that the distribution is an eligible hardship withdrawal, took effect on December 31, 2022.

“While significant progress continues to be made in how American workers save and invest in their employer-sponsored retirement plans, there are still areas for improvement,” the report stated. “Thoughtful plan features, like automatic enrollment with gradual increases, high default contribution rates for employees and strong employer contributions, can remove barriers to saving for retirement and help boost workers’ retirement readiness.”

Vanguard’s report is based on data from approximately 5 million DC plan participants in retirement plans for which Vanguard is the recordkeeper.