Inside The Plan

The Latest on Savings Rates

In this episode of "Inside the Plan with the 401k Brothers," hosts Bill and Andy Bush, from Horizon Retirement Plans, a division of Horizon Financial Group, delve into the topic of savings rates influenced by findings from Vanguard and Fidelity related to participant behavior in retirement plans. They cover vital statistics on savings rates, the impact of inflation on savings behaviors, the benefits of starting early, and strategies for increasing savings rates over time.

Episode Highlights:

00:08: Bill introduces the podcast, highlighting its focus on savings rates and the importance of participation in retirement planning. He sets the stage for the episode's discussion on harnessing findings from record keepers to enhance personal savings strategies.

00:30: Andy greets listeners and emphasizes the value of comparing one’s savings rates to averages to identify opportunities for adjustments, underscoring the concept of a "healthy comparison."

00:55: The hosts discuss recent reports from Vanguard and Fidelity, reflecting on the year 2023 and the first quarter of 2024. They highlight the average combined savings rate of 11.7%, based on Vanguard's analysis of employee contributions and employer match, over 1500 qualified plans and 5 million participants.

01:44: Bill corrects Andy on the savings rate percentage provided by Vanguard, emphasizing the accuracy of data in financial discussions and the goal of achieving a 15% savings rate when starting at an early age for a secure retirement.

02:24: The conversation shifts towards the inclusion of employer contributions in saving rates and the recommendation for individuals to strive for a 10 to 15% personal savings rate if feasible.

02:51: Fidelity’s findings from the first quarter of 2024 are presented, showcasing a combined savings rate of 14.2% across 26,000 corporate plans, spotlighting the broad base of data supporting these findings.

03:37: Bill and Andy touch on the challenges that high inflation poses on savings, especially when wages do not keep pace, yet highlight that a significant portion of employees increased their savings rate in 2023 despite these challenges.

04:37: The discussion pivots to the thoughtful adjustments people make in response to economic pressures, including lifestyle changes that can free up funds for retirement savings.

05:12: The hosts underline an intriguing statistic from Vanguard that nearly 25% of participants deferred more than 10% of their earnings into their retirement plans, indicating a strong commitment to future financial security among a notable segment of savers.

06:00: Fidelity's report on the average deferral rate of 9.4% in the first quarter of 2024 is highlighted, reflecting a robust engagement in self-funded retirement savings among participants.

06:26: The significance of regularly reviewing and adjusting savings rates is underlined, with advice to capitalize on milestones such as the end of a car payment to increase retirement savings contributions.

08:46: Insights into how 401k plan design, including features like automatic enrollment and annual increases, have positively influenced saving behaviors over time, are shared.

Key Takeaways:

- Starting early and consistently contributing to your retirement plan, ideally aiming for a 15% savings rate, can significantly impact your financial security in retirement.

- Adjusting lifestyle choices and budgets in response to economic conditions, like inflation, can enable individuals to maintain or even increase their savings rates over time.

- Regularly reviewing and potentially adjusting your savings rate in response to life changes or during annual financial reviews can help ensure that your retirement savings strategies align with your long-term goals. - Features like automatic enrollment and automatic contribution increases in 401k plans have been instrumental in boosting overall savings rates and should be leveraged by participants to optimize their retirement savings efforts.

Tweetable Quotes:

- "In our industry, savings rates are a beacon, guiding us towards our retirement goals." – Bill

- "The power of compounding is the eighth wonder of the world. Start saving now." – Andy

Resources Mentioned: