Participation rates in workplace retirement plans record-kept by Vanguard hit an all-time high in 2022 despite inflation, rising interest rates and a significant market downturn, according to Vanguard's latest edition of its annual "How America Saves" report.
In 2022, Vanguard plans had a record average participation rate of 83%, up from 82% in 2021 and 77% in 2018.
Vanguard attributed the increase to the rising adoption of automatic enrollment by plan sponsors, which more than tripled since 2006. At the end of 2022, 58% of Vanguard plans had adopted automatic enrollment, including 76% of plans with at least 1,000 participants.
Average participant deferral rates also remained at a record high of 7.4%. Nearly 98% of participants also offered some type of employer contribution, bringing the total average contribution to 11.3%, up from 10.7% in 2018.
In a letter in the report, John James, managing director of Vanguard's institutional investor group, noted the record highs in participation and deferral rates. "This is a credit to many of our sponsors, who strategically improved plan design and introduced new features despite a volatile economy," he said in the letter.
Participants also displayed a willingness to stay the course, which Vanguard trumpeted in the report. In 2022, just 6% of participants traded in their retirement accounts, the lowest level of participant-directed trading activity in nearly two decades.
Vanguard credited participants' greater ability to weather market volatility to the growing adoption of target-date funds and their professionally managed allocations.
The report is based on approximately 1,700 defined contribution plans and nearly 5 million participants for which Vanguard directly provides record-keeping services.