Importance of Retirement Savings: Lessons from How America Saves and Beyond
Importance of Retirement Savings: Lessons from How America Saves and Beyond
Retirement saving is no longer optional, it’s essential. On June 25, 2025, Investment News published an article titled “Who’s still falling behind? Vanguard report shows retirement divide despite record participation,” highlighting critical gaps in retirement preparedness even amid record high participation rates in 401(k) plans. The article draws on Vanguard’s How America Saves 2025 report, reflecting the behaviors of nearly five million participants.
Key Findings from How America Saves 2025
- The average deferral rate hit a record 7.7%, and with employer contributions, total saving averages 12% of income, near Vanguard’s recommended 12–15% range.
- A record 45% of participants increased their own contribution rate during 2024.
- 61% of plans now offer auto-enrollment, and nearly 30% default new employees into 6% or more contributions.
- 67% of participants are in professionally managed allocations, mostly target date funds, which automatically adjust asset allocation over time based on the participant’s expected retirement date. This “set it and forget it” approach can sometimes be too conservative when outside assets and other factors are considered.
Where Plan Participants Are Falling Short
Despite progress, key segments remain underprepared:
- Workers earning under $15,000 annually have only 31% participation, and those under age 25 enroll at just 25% in voluntary plans, versus 90% in auto enrollment environments.
- Median balances are too low with $1,948 under age 25 and $95,642 for participants over age 55 .
- Many participants invest too conservatively relying heavily on default target date funds that may underperform higher equity strategies as markets recover.
- The anxiety of inflation and market volatility has eroded confidence: only one third of participants now feel “very likely” to meet their retirement goals—down from 43% a year ago.
- Hardship withdrawals climbed in 2024 (4.8% for hardship withdrawals; 4.5% for non hardship), signaling that many use retirement accounts as emergency funds rather than preserving them for later life.
Broader Context: Why Adequate Saving and Investment Strategy Matter
According to Investopedia and Allianz Life surveys, nearly 64% of Americans fear running out of money in retirement more than death itself. Half of households may not maintain their pre retirement standard of living without more savings or better planning.
Barron’s notes that excessively conservative target date funds, high plan fees, and/or a lack of diversification significantly limit accumulation potential—even for diligent savers. Additionally, not considering other funds outside of retirement savings may cause a misallocation to target date funds.
The power of early, compounding growth is repeatedly emphasized: consistently saving—even small amounts—and leveraging low cost index funds and employer matching can dramatically improve outcomes over longer periods of time.
How Courier Capital Can Help Plan Participants
Courier Capital is well-positioned to assist plan participants in overcoming these challenges by offering personalized, proactive guidance tailored to individual needs:
- Plan design consulting
Courier Capital can work with plan sponsors to adopt or enhance auto-enrollment, auto-escalation, and higher default deferral rates—structures shown by Vanguard to markedly increase participation and savings rates. - Investment strategy and guidance
By providing managed account advice or helping plan sponsors select appropriate target-date funds with well constructed glide paths, Courier Capital ensures investments align with participants retirement timelines—while avoiding overly conservative allocations. - Participant education and communication
Courier Capital can deliver financial wellness seminars, tools, and interactive tools that combat inertia—especially among younger and lower income workers—and encourage contributions, diversification, and long term commitment. - Advanced longevity modeling and holistic planning
Using longevity risk models and income first planning strategies, Courier Capital helps ensure retirees have sustainable spend-down plans, incorporate Social Security optimization, and maintain inflation resilient portfolios. - Emergency savings integration
To limit leakage from retirement accounts (e.g. hardship withdrawals), Courier Capital can support offering outside emergency savings tools and highlight alternatives to tapping retirement balances prematurely.
Conclusion
While How America Saves 2025 shows remarkable progress such as record participation, increasing contributions, and wider adoption of professionally managed allocations, significant gaps remain. Many workers are either not saving enough, saving too conservatively, or accessing their retirement funds prematurely. Without intervention, these behaviors may compromise long-term financial security.
Courier Capital can help bridge those gaps by structuring smart plan designs, delivering tailored investment guidance, educating participants, and supporting integrated planning. The goal: help more Americans reach that recommended 12–15% total savings rate, build diversified, durable portfolios, and retire with confidence.
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References
• InvestmentNews, “Who’s still falling behind? Vanguard report shows retirement divide despite record participation,” June 25, 2025
• Vanguard, How America Saves 2025 report
• MarketWatch summary of Vanguard findings
• Investopedia, “This Generation Is Actually Good at Saving for Retirement”
• Barron’s, “Want to Be a 401(k) Millionaire?”
• Allianz Life / Business Insider article on retirement risk
• AP News on market volatility stress for retirees
• General research on longevity risk and retirement planning
Courier Capital, LLC (“Courier Capital”) is an SEC registered investment adviser located in Buffalo, NY, Rochester, NY, Jamestown, NY and Pittsburgh PA. For information pertaining to the registration status of Courier Capital, as well as its fees and services, please refer to our disclosure statement as set forth on Form ADV, available upon request or via the Investment Advisor Public Disclosure Website(www.adviserinfo.sec.gov). The information contained herein should not be construed as personalized investment advice or a solicitation to buy or sell any security. Investing in the stock market involves risk of loss, including loss of principal invested, and may not be suitable for all investors. Past performance is no guarantee of future results. This material contains certain forward-looking statements which indicate future possibilities. Actual results may vary. Additionally, this material contains information derived from third party sources. Although we believe these sources to be reliable, we make no representation as to the accuracy of any information prepared by an unaffiliated third party incorporated herein, and take no responsibility therefore. All expressions of opinion reflect the judgement of the authors as the date of publication and are subject to change without prior notice. Investment products and services are not FDIC Insured, are not a deposit or bank guaranteed, are not insured by any Federal governmental agency, and are subject to investment risks, including possible loss of the principal invested.
