WSJ Your Money Briefing - Workers Are Saving Almost What They Should Be for Retirement

Episode Date: June 11, 2025

According to a Fidelity Investments analysis, the average American retirement savings rate in the first three months of the year was 14.3% – just shy of the recommended 15%. Host Ariana Aspuru speaks with Wall Street Journal reporter Anne Tergesen about why savers are putting away a record amount of their income for retirement. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Whether it's a family member, friend or furry companion joining your summer road trip, enjoy the peace of mind that comes with Volvo's legendary safety. During Volvo Discover Days, enjoy limited time savings as you make plans to cruise through Muskoka or down Toronto's bustling streets. From now until June 11th. I'm Mariana Ascuru 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 Ann Turgison 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.

At Desjardins Insurance, we know that when you own a law firm, your bar for everything is high. That's why our agents go the extra mile to understand your business and provide tailored solutions for all its unique needs. You put your heart into your company, so we put our heart into making sure it's protected. Get insurance that's really big on care. Find an agent today at Desjardins.com slash business coverage. Americans are now saving almost as much as they're supposed to for retirement. Wall Street Journal reporter Anne Turgison joins me to talk about it. Anne, just how big of a milestone is this for retirement savers? One thing 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. 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 for O&K plans for reasons 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 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 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 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 percent, 12 percent, whatever. And if your plan has that program, you can just sign up for it. So the idea being that 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, 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 Turkesson and that's it for your money briefing. I'm Arianna Aspuru for the Wall Street Journal. This episode was produced by me with supervising producer Melanie Roy. Thanks for listening.

["Dreams of a New World"]