86% of Vanguard 401(k) Plans Now Offer Employer Matching Contributions. Are You Taking Advantage of This Benefit?
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What the data shows is Vanguard recently released its "How America s 2025" report, which offers insight into the apximately 1,400 defined contribution plans it manages, as well as the...
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personal finance
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July 21, 2025
08:00 PM
The Motley Fool
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What the data shows is Vanguard recently released its "How America s 2025" report, which offers insight into the apximately 1,400 defined contribution plans it manages, as well as the savings habits of the 4. 8 million participants in those plans
The data indicates that good news is a lot of people are making use of employers' defined contribution plans, typically a 401(k) (an important development)
But there's one key benefit in your 401(k) you should know and take advantage of as it amounts "free" money (which is quite significant)
The basics of a 401(k) plan Essentially, a 401(k) plan is a tax-deferred retirement account offered by your employer, considering recent developments
It's similar in nature to a traditional IRA
You put income in without paying taxes on that money, which lowers your tax bill today
That money can grow without tax consequences until you withdraw it, considering recent developments
At that point, the cash coming out of the account is taxed as regular income
Furthermore, Image source: Getty Images, in today's market environment
There are various rules to be aware of, but that's the big picture, given the current landscape
What the re reveals is 's a great idea to take advantage of your company's 401(k) if it offers one
Additionally, Most employees do but not all
In 2024, the year Vanguard's report covers, roughly 82% of those with access to a defined contribution plan made use of it, considering recent developments
That said, there's a wrinkle in the participation rate that's important
Plans that required the employee to enroll themselves only saw a participation rate of 64%, in today's market environment
Meanwhile, Plans with automatic enrollment, on the other hand, saw a participation rate of 94%
Conversely, To be fair, the automatic enrollment feature is relatively new, so if you have been with your company for a long time, you may not have benefited from this feature, given the current landscape
Either way, if your company has a 401(k) plan and you aren't enrolled, you should do so as soon as possible
However, How much should you
Furthermore, But enrolling is just one of the key decisions you have to make (an important development)
The next one is how much you should, which is known as your contribution rate
Nevertheless, For those just getting started, even 1% is better than nothing
On the other hand, Sure, 1% of your salary may seem small, but it is hard to overstate the importance of a consistent saving habit, amid market uncertainty
Additionally, The sooner you start, the better
Moreover, Even if you are tight on money, try to set aside at least 1% (this bears monitoring)
However, On the opposite end of the spectrum, some workers are dedicated enough to contribute up to the allowable limit
Moreover, In 2024, a person under the age of 50 could up to $23,000
Thanks to a catch-up vision, the maximum increased to $30,500 for those 50 and older
If you can afford to max out your 401(k) contributions, you are ly in great shape
Just 14% of participants maxed out their plans in 2024 ( 16% of those eligible took advantage of the catch-up vision)
Image source: Getty Images
However, most people fall somewhere between 1% and the maximum savings level
In 2024, Vanguard's data shows plan participants had a median contribution rate of 6, considering recent developments
Though that number should ideally be higher, it is usually enough to take advantage of an important benefit many plans offer: the employer match, which has a median value of 4%, according to the report
While it is important to just start saving, if you can at least enough to max out your employer's match, you will be way (WAY
Furthermore, ) ahead of the game
With a dollar-for-dollar match, for example, contributing 4% of your salary would mean your employer also contributes an additional 4% on your behalf, doubling the amount of money you
Additionally, This's essentially free money going to your retirement account, and it amounts to a guaranteed return on your contributions before you even start them
However, Don't miss out on the "free" stuff Saving in a 401(k) plan means deferring spending today in to boost your retirement income in the future, in light of current trends
That's hard to do emotionally and financially (something worth watching)
But once you get started on the saving journey, it gets easier
Based on the report, 86% of defined contribution plans feature employer matching contributions
While this Vanguard-specific data may not be representative of all employers across the country, this benefit has become common enough that anyone saving through a 401(k) should find what their own company offers and take advantage of the match when available
A matching contribution will not only materially increase your savings but give you an immediate financial reward to bolster your savings habit over the long term (quite telling)
So if your plan offers it, your first savings goal should be to max out the match, in this volatile climate.
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