Retirement plan participation reaches record high, but financial pressures persist

Retirement plan participation among eligible U.S. workers reached a record 86% last year, according to Vanguard‘s 2026 How America Saves report, which analyzed retirement savings behavior across nearly 5 million defined contribution plan participants.

The annual report found that automatic enrollment, higher default contribution rates and broader use of professionally managed investments have reshaped retirement savings over the past 25 years, contributing to higher participation rates and increased account balances.

Participation among eligible employees has increased from 65% to 86% since the report was first published a quarter century ago, reflecting the expanded use of automatic enrollment.

Nearly two-thirds of retirement plans now automatically enroll new participants at contribution rates of at least 4%, while about one-third use default rates of 6%, the report explained.

“More than 25 years of data and insights make it clear — strong default contribution options and automatic features have made saving for retirement more accessible and effective for more Americans than ever before,” said Lauren Valente, managing director of Workplace Solutions at Vanguard.

Savings rates and account balances climb

The report found that participants are also saving at higher rates. Forty-five percent of workers increased their contribution rates in 2025, helping push the average combined employee and employer savings rate to a record 12.1%.

Average account balances increased 13% from a year earlier, supported by continued contributions and market performance.

Investment behavior also remained relatively steady despite periods of market volatility. According to the report, only 5% of participants made changes to their investment allocations during the year.

The use of professionally managed investment portfolios has also increased over time. Nearly 70% of participants now rely on professionally managed allocations, contributing to broader portfolio diversification, according to the report. Employer matching contributions reached a record average of 4.7%.

Home equity gains attention in retirement planning

The findings come as retirement professionals are increasingly viewing home equity as a key source of retirement income.

Reverse mortgage lenders are positioning home equity as a planning tool for retirees who seek greater financial flexibility, rather than as a product of last resort.

But industry data reflects a mixed picture. Mutual of Omaha Mortgage remained the nation’s largest reverse mortgage lender in May with a 21.5% market share, although its loan volume declined 14.9% from April and was 9.4% below year-ago levels.

Finance of America ranked second and was one of the few major lenders to post a monthly increase in production, despite lower year-to-date volume. The top 100 retail lenders endorsed 1,967 Home Equity Conversion Mortgages (HECMs) in May, down 4.7% from April and 10.8% lower year over year.

Shannon Robinson, senior vice president of New American Funding‘s reverse division, recently told HousingWire‘s Reverse Mortgage Daily (RMD) that demographic trends continue to support long-term demand.

“The state of reverse mortgages in the industry is really being driven by two powerful realities right now,” Robinson said. “One is that more than 11,000 Americans are turning 65 every day, and homeowners over the age of 60 to 62 years old hold over $15 trillion in housing wealth.

“When you just sit there and think about that statement, it’s extremely powerful. So, as active adults are looking for ways to navigate inflation and create financial flexibility, home equity is becoming an increasingly important part of the retirement conversation, and NAF is very much focused on that.”

Some lenders are also targeting affluent homeowners, marketing reverse mortgages as wealth management tools that can improve cash flow, reduce taxes and preserve investment portfolios.

Proprietary reverse mortgages have become a larger share of business for many originators, partially because they allow borrowers with higher-value homes to access more equity while avoiding the Federal Housing Administration‘s upfront mortgage insurance premiums on HECM offerings.

Still, higher interest rates and softer home prices continue to weigh on the market.

“Overall, 2026 has been a challenging year,” Gabe Bodner, a reverse mortgage planner and president at OneTrust Home Loans, told RMD. “Part of the reason is that with interest rates being higher, it has reduced principal limit factors, and we’re finding many borrowers are short cash to close, unfortunately.

“The other interesting thing is we’ve seen home values softening across most markets, but homeowners have an inflated opinion of the value of their home. And that has resulted in quite a few instances where values are coming in short or low, which is again causing borrowers to be short cash to close.”

Financial pressures remain a challenge

Despite improvements in retirement savings, the report noted that many workers continue to face financial pressures that affect their ability to balance short-term expenses with long-term retirement planning.

Vanguard said increased hardship withdrawals indicate ongoing challenges with financial resilience.

“While the progress and participant outcomes are significant, they also highlight where we need to go next,” Valente said. “Continuing to strengthen the system means helping Americans manage short-term financial pressures while staying on track for long-term retirement security and expanding solutions that support them at every stage of their journey.”

How America Saves is Vanguard’s annual analysis of participant behavior and retirement plan design trends across defined contribution plans.

This article was written by Jonathan Delozier and generated with the assistance of HousingWire Automation. It was reviewed by a HousingWire editor before publication.