News & Trending Money News

Vanguard Data Reveals the Savings Rate You Actually Need - And Most People Are Below It

The number that matters includes more than your paycheck.

By Adam Palasciano , Edited by Laura Hohenstein

Updated Aug. 20, 2026

Add Us On Google

Vanguard's latest data offers a clear retirement savings benchmark: Aim to put away about 12% to 15% of your pay each year. The sometimes overlooked detail is that the target includes both your contributions and money from your employer, such as a match or profit-sharing deposit. That distinction could make a retirement plan look healthier than your paycheck deferral alone suggests. It could also expose a gap you didn't know was there. Ultimately, the combined number is the one that matters.

In its How America Saves 2026 report, Vanguard found that workers contributed an average of 7.6% of pay in 2025, while the average total reached 12.1% after employer contributions were included. That sounds encouraging, but averages could hide wide differences by income, age, tenure, and plan design.

The real gap is easier to miss than the headline number suggests.

Set up direct deposit - pocket $400

Set up an eligible direct deposit with SoFi Checking and Savings and you could pocket a bonus of up to $400. Make the switch, set up direct deposit, earn the bonus. It basically takes no extra work at all other than following these steps.

Why people are switching: This account earns up to an insane 4.00% APY¹ Earn up to 4.00% Annual Percentage Yield (APY) on one SoFi Savings account with a 0.90% APY Boost (added to the 3.10% APY as of 5/28/26) for up to 6 months. Open your first SoFi Checking and Savings account and receive eligible direct deposits OR qualifying deposits of $5,000 every 31 days by 12/31/26. Rates are variable, subject to change. Terms apply at <a href="https://www.sofi.com/banking/#4">sofi.com/banking#4</a>. SoFi Bank, N.A. Member FDIC. on savings for up to six months (3.10% APY standard + 0.90% APY boost) on top of that $50 or $400 bonus.² New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Eligible Direct Deposits received within 25 calendar days of your first Eligible Direct Deposit of $1 or more) OR $400 (with at least $5,000 total Eligible Direct Deposits received within 25 calendar days of your first Eligible Direct Deposit of $1 or more). Cash bonus amount will be based on the total amount of Eligible Direct Deposit received within 25 calendar days of your first Eligible Direct Deposit of $1 or more. If you have satisfied the Eligible Direct Deposit requirements but have not received a cash bonus in your Checking account, please contact us at 855-456-7634 with the details of your Eligible Direct Deposit. Direct Deposit Promotion begins on 5/15/2026 and will be available through 12/31/26. See full bonus and annual percentage yield (APY) terms at <a href="https://www.sofi.com/banking/checking-offer/">sofi.com/banking/checking-offer/</a> That's way better than the measly 0.38% APY (as of 06/15/26)³ Based on <a href="https://www.fdic.gov/national-rates-and-rate-caps">this</a> FDIC data, as of 6/15/26. national average savings accounts offer.

No monthly fees and no surprises. Open your account and earn up to a $400 bonus

Vanguard's target includes employer money

Vanguard estimates that a typical worker should target a combined contribution rate of 12% to 15%, including employee and employer deposits. So, a worker saving 8% and receiving a 4% employer contribution has reached 12%, even though only 8% comes out of the worker's paycheck.

Start by reviewing your latest 401(k) statement or benefits portal, and add every employer contribution to your own annual deferral. That calculation gives you a more useful comparison than looking at your personal percentage alone.

Shopping for cheaper auto insurance? Enter your zip code here to get started.

The average saver is close, but many still fall short

The report indicates that just over half (51%) had contribution rates that met the 12% to 15% target range or reached the legal contribution limit.

That leaves 49% below those benchmarks, which is close to half, not an overwhelming majority.

Few workers contribute the legal maximum

Only 14% of participants contributed the 2025 maximum of $23,500, or $31,000 for workers age 50 and older. Those savers tended to earn more, have longer tenure, be older, and hold larger account balances.

Most middle-class households don't need to hit the federal limit to make meaningful progress. A consistent percentage that captures the full employer match and rises over time may be more realistic than chasing a dollar ceiling designed for higher earners.

Resolve $10,000 or more of your debt

National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.⁴ Please note that all calls with the company may be recorded or monitored for quality assurance and training purposes. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 45% before fees, or 20% including our fees, over 24 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for various reasons, including their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period of time. We do not assume consumer debt, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. Depending on your state, we may be available to recommend a local tax professional and/or bankruptcy attorney. Read and understand all program materials prior to enrollment, including potential adverse impact on credit rating. "Debt-Free" applies only to enrolled credit cards, personal loans, and medical bills. Not mortgages, car loans, or other debts. Results vary.

Capture the full employer match first

An employer match is part of the 12% to 15% target, and leaving it unclaimed makes the gap harder to close with personal contributions later. Check the plan's formula because some employers may match dollar for dollar up to a set percentage, while others may contribute 50 cents per dollar or could require you to contribute throughout the year.

At a minimum, try to defer enough to receive the entire available match. After that, raise your own rate gradually based on what your budget could handle.

Automatic increases can do the heavy lifting

Vanguard found that 45% of participants had their elected savings rate increase in 2025. Only 14% raised it on their own, while 31% received an automatic increase through their plan. That's a strong argument for enrolling in annual escalation if your plan allows, especially if you tend to postpone financial housekeeping.

If you're eligible for a cost of living adjustment each year, and you contribute an additional 1% to your retirement savings at the same time, you likely won't feel that you lost too much of your salary bump. Meanwhile, you'll be quietly building your retirement nest egg at the same time.

Hardship withdrawals reveal increased financial pressure

Saving more isn't always a simple matter of discipline. A record 6% of eligible participants took a hardship withdrawal in 2025, up from 5% the year before, as workers faced short-term financial needs while trying to preserve long-term savings. Vanguard noted that the pressures of inflation and rising interest rates and easier plan administration features have all contributed to the increase.

Building even a modest emergency fund outside the 401(k) may reduce the chance that an unexpected bill interrupts your retirement progress.

Make Money: 8 things to do if you're barely scraping by financially

Bottom line

What percentage of your pay is actually reaching retirement accounts once your contribution and your employer's deposits are added together? Pull up your latest statement, calculate the combined rate, and compare it with a reasonable target for your income rather than assuming your current election is enough.

When the gap feels too large, increase your contribution by one or two percentage points and turn on automatic escalation. Small, repeated adjustments could lower your financial stress while giving future raises, employer money, and compounding more time to work.

FAQs

Does emergency savings count toward Vanguard's 12% to 15% target?

No. Vanguard's benchmark applies to retirement contributions from you and your employer, not money held in a savings account. Still, an emergency fund can help you avoid tapping your 401(k) when surprise expenses arise. Check your account's APY, too, since big banks can post record profits while still paying low savings rates. A competitive high-yield account could help your short-term savings grow faster without mixing it with your retirement funds.

What if I can't save 12% to 15% of my income for retirement?

Start by contributing enough to receive your full employer match, then increase your rate gradually as your budget allows. Even a 1% annual increase can meaningfully improve your long-term savings.

Should I count my employer match toward my retirement savings rate?

Yes. Vanguard's 12% to 15% benchmark includes both your contributions and employer deposits. For example, saving 8% with a 4% employer contribution would give you a combined savings rate of 12%.

More from FinanceBuzz: