Vanguard’s annual How America Saves 2026 report reveals that American workers’ retirement account balances climbed to unprecedented levels last year.
The average 401(k) balance among Vanguard participants reached $167,970 in 2025, nearly $20,000 higher than the 2024 average of $148,153.
The median account balance also rose meaningfully, climbing from $38,176 in 2024 to $44,115 in 2025, reflecting broad-based growth across income levels.
Among workers who held active accounts in both December 2024 and December 2025, median balances surged by 27%, a striking year-over-year gain.
Vanguard attributed the growth to a combination of higher employee contributions and strong market performance throughout the year.
The S&P 500 gained 16% in 2025, while bonds rose 7%, providing a favorable backdrop for workers who remained invested through market turbulence.
That market strength arrived even as broader economic pressures mounted, with credit card delinquencies hitting a 13-year high and layoffs surging to their highest level since the pandemic.
Auto-enrollment policies played a significant role in driving participation, with a record 79% of large Vanguard plans automatically enrolling new hires in 2025, up sharply from just 34% in 2013.
Nearly two-thirds of those auto-enrollment plans started workers at contribution rates of 4% of their paycheck or more, helping build balances from day one of employment.
The average deferral rate held steady at 7.6% of income in 2025, unchanged from 2024, while the median rate edged slightly lower from 6.7% to 6.6%.
A quarter of all participants contributed more than 10% of their income to their accounts, indicating a meaningful cohort of highly committed retirement savers.
The share of participants in professionally managed allocations, including target-date funds, balanced funds, and managed accounts, hit an all-time high of 69% in 2025.
That group traded four to five times less frequently than other investors during the market volatility that followed the Trump tariffs announced in April 2025.
Despite the record balance growth, hardship withdrawals also hit a new high, with 6% of Vanguard participants tapping their accounts early, the sixth consecutive annual increase.
That figure is triple the pre-pandemic rate, with the median hardship withdrawal amount coming in at $1,900, a relatively modest sum reflecting many small-scale financial emergencies.
Vanguard noted that looser rules and easier plan administration contributed to the rise in hardship withdrawals, not solely financial distress among participants.
