Recent studies from Vanguard and the Transamerica Center for Retirement Studies paint a much brighter picture of Americans’ retirement savings than often reported.

According to Vanguard’s “How America Saves 2024” report, Americans are saving for retirement at unprecedented rates. Over 40% of workers increased their 401(k) contributions last year, despite high inflation. This analysis, based on data from 1,500 qualified plans and nearly 5 million participants, shows that these plans are effectively encouraging stronger savings behaviors.

Automatic enrollment has played a significant role in boosting savings. Currently, 60% of retirement plans automatically enroll employees, compared to only a third a decade ago. This feature, combined with an increase in the deferral rate (the percentage of paychecks deferred to 401(k)s), has resulted in an average total savings rate of 11.7%, the highest recorded by Vanguard in over two decades.

The average retirement account balance at Vanguard increased by 19% in 2023, reaching $134,128, with the median balance rising to $35,286—a 29% increase from the previous year. The recovery of the stock market has significantly contributed to these gains.

While participation in retirement savings varies widely, there are positive trends. Although 95% of employees earning over $150,000 contribute to their plans, 58% of those earning between $30,000 and $49,999 do so. Additionally, younger workers and those with less job tenure are increasingly participating in these plans.

Target-date funds have become increasingly popular, with 83% of participants using them. These funds automatically adjust investment allocations as the retirement date approaches, providing a hands-off investment strategy.

Despite the positive trends, there has been a record high in hardship withdrawals. In 2023, nearly 4% of Vanguard 401(k) holders withdrew funds early for financial emergencies, primarily for medical expenses and to avoid foreclosure or eviction.

Transamerica’s research highlights the rise of “super savers,” individuals who contribute over 10% of their salaries to retirement plans. Currently, 44% of 401(k) participants fall into this category, including 53% of Generation Z and 44% of Millennials. This is a significant increase from previous years, indicating a growing awareness of the importance of retirement savings.

Generation Z is starting to save for retirement earlier than previous generations, beginning at age 20. In comparison, Millennials began at 25, Generation X at 30, and Baby Boomers at 35.

Experts emphasize that, in addition to saving, maintaining health and updating job skills are crucial for a secure retirement. These factors can help individuals work longer, save more, and ultimately grow their retirement savings.

These findings suggest that while challenges remain, many Americans are taking significant steps towards securing their financial future.