Americans’ 401(k) balances hit record levels in 2025
Hardship withdrawals, however, increased for the fourth straight year
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Americans’ contributions to their 401(k) savings accounts hit record highs in 2025, according to a new report from Vanguard.
Among employees with active 401(k) accounts in both December 2024 and December 2025, median account balances increased by 27%, according to the report, titled How America Saves 2026.
Of those same participants, 94% saw an increase in their account balances, reflecting both a rise in contributions and strong returns from markets, according to the report.
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The average account balance for a Vanguard 401(k) was $167,970 in 2025, a near $20,000 increase from the 2024 average of $148,153. The median account balance, meanwhile, also increased year over year, rising from $38,176 in 2024 to $44,115 in 2025.
One factor the report cites as a potential impact on the higher contributions is a shift in automatic employee enrollment.
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Some employers have shifted to automatically enrolling employees in 401k plans, with the share of Vanguard-defined contribution plans using automatic enrollment sitting at 61% in 2025 compared with just 10% in 2006.
By reframing an employee’s decision into opting out, rather than voluntarily opting in, employers encourage significantly stronger participation in retirement plans, according to the report.
“With an autopilot design, individuals are automatically enrolled into the plan, their deferral rates are automatically increased each year, and their contributions are automatically invested in a balanced investment strategy. In such a plan, the decision to save is framed negatively: ‘Quit the plan if you’d like.’ And ’doing nothing; leads to participation in the plan and investment of assets in a long-term retirement portfolio,” the report states.
American flags on the floor at the New York Stock Exchange in New York, on Aug. 18, 2025. (Michael Nagle/Bloomberg via Getty Images)
Employees deferred a similar percentage of their total incomes into plans in 2025 when compared with 2024, though deferral rates have broadly trended up in the last decade.
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The average deferral was 7.6% of an employee’s income in 2025, the same as it was in 2024, per the report. The median rate was 6.6% in 2025 compared with 6.7% in 2024.
A quarter of all participants had a deferral rate of over 10% of their incomes. That compared with just 20% of participants deferring more than a tenth of their income in 2016, the report noted.
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The report wasn’t all positive. Hardship withdrawals increased for the fourth straight year, rising to 6% in 2025 from 5% the previous year. While the report cited potential pressures from inflation and other economic challenges, it also noted that a recent streamlining in the process to apply for hardship withdrawals has “made retirement assets more accessible in times of need.”
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