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IRS raises 401(k) contribution limits for 2026<\/p>\n
IRS increases 401(k) and catch-up contribution limits for 2026, allowing workers to save up to $32,500 for retirement.<\/p>\n
A new report on retirement savings paints a worrisome picture: Fewer workers are saving, and only top earners are increasing their contributions\u00a0from year to year.\u00a0<\/p>\n
The analysis, released Nov. 18 by the human\u00a0capital management company\u00a0Dayforce, draws on\u00a0more than 1 million\u00a0anonymized records for workers from 2021 through\u00a02024.\u00a0It is titled\u00a0The Retirement Divide<\/a>.\u00a0\u00a0<\/p>\n Much available\u00a0data on retirement savings comes from individual investment firms\u00a0and focuses\u00a0only\u00a0on their clients. This\u00a0analysis\u00a0covers the entire full-time workforce. The report\u00a0says\u00a0it\u00a0represents\u00a0\u201cthe fullest picture to date of the true state of retirement security in America.\u201d\u00a0<\/p>\n The findings show\u00a0many\u00a0American workers losing ground on retirement savings between 2021 and 2024, a span marked by rising inflation and interest rates, dwindling savings and\u00a0mounting debt.\u00a0\u00a0<\/p>\n The share of full-time workers participating in retirement savings plans dipped from 79.4% in 2021 to 78.7% in 2024, the analysis found.\u00a0<\/p>\n The average amount contributed to\u00a0a\u00a0retirement account rose in those years, from $8,370 in 2021 to $9,488 in 2024. The average savings rate rose, as well, from 8.8% to 9.3%.\u00a0<\/p>\n But most of the gains came from the top earners.\u00a0\u00a0<\/p>\n Top earners benefit most from 401(k)s<\/p>\n Among\u00a0full-time\u00a0workers earning between $15,000 and $50,000 a year, retirement-plan participation dropped from 58% in 2022 to 52.9% in 2024.\u00a0\u00a0<\/p>\n Participation rates dropped, as well, for workers earning between $50,000 and $150,000. Only\u00a0employees earning more than $150,000\u00a0posted\u00a0an increase in retirement-savings participation.\u00a0<\/p>\n \u201cNearly all of those gains have gone to higher-income workers,\u201d said\u00a0Jason Rahlan<\/a>, global head of sustainability and impact at Dayforce. He said the report \u201cshould serve as both a wakeup call and a call to action.\u201d\u00a0\u00a0<\/p>\n The average retirement savings rate dipped\u00a0from\u00a02022\u00a0to\u00a02024 for every group of earners\u00a0Dayforce studied,\u00a0except the top tier:\u00a0<\/p>\n For those earning $15,000 to $50,000, the retirement savings rate\u00a0declined from 4.9% to 4.6%\u00a0of income, less than half the savings rate for top earners.\u00a0For those earning $50,000 to $100,000, the savings rate fell from 9.6% to 9.3%.\u00a0<\/p>\n Total retirement contributions declined, as well, for\u00a0all\u00a0but the\u00a0highest\u00a0earners:\u00a0<\/p>\n For those earning $15,000 to $50,000, average\u00a0annual\u00a0contributions slipped from $1,918\u00a0in 2022\u00a0to $1,815\u00a0in 2024.\u00a0For those earning $50,000 to $100,000, average contributions fell from $6,814 to $6,630.\u00a0Older generations are lagging in retirement saving<\/p>\n Older generations of Americans are lagging in retirement saving, the report found.\u00a0<\/p>\n Participation in retirement savings plans rose between 2022 and 2024 for Gen Z workers, from 64% to 68.7%. For millennials, participation climbed from 78.4% to 80.2%.\u00a0<\/p>\n But retirement-savings participation fell for\u00a0Gen X\u00a0and\u00a0boomer\u00a0workers, to 82% and 78.7%, respectively.\u00a0<\/p>\n White and Asian workers are more likely to save for retirement than Black and Latino employees, the report found, although all groups are making\u00a0some\u00a0progress.\u00a0<\/p>\n Here are retirement savings rates by race in 2024:\u00a0<\/p>\n Asian: 11.3%\u00a0White: 10%\u00a0Black: 6.8%\u00a0Latino: 7.5%\u00a0<\/p>\n And here are average retirement contributions by race in 2024:\u00a0<\/p>\n Asian: $12,939\u00a0White: $11,676\u00a0Black: $5,404\u00a0Latino: $5,389\u00a0More workers are borrowing from 401(k)s<\/p>\n More workers are borrowing money from their retirement accounts, the report found, transactions\u00a0that deprive the saver of valuable capital gains while they repay the funds.\u00a0<\/p>\n The share of white savers who took loans against retirement plans rose from 14% in 2022 to 14.9% in 2024. Among Black and Latino savers, the loan rate rose from 25.3% to 26.4%.\u00a0<\/p>\n Prior research shows progress in retirement saving<\/p>\n The Dayforce report runs counter to\u00a0much previous\u00a0retirement savings research,\u00a0which shows workers making steady upward progress.\u00a0<\/p>\n In the first three months of 2025, the total 401(k) savings rate on Fidelity\u00a0retirement\u00a0plans reached 14.3%,\u00a0an all-time high<\/a>.\u00a0\u00a0<\/p>\n An annual report from\u00a0Vanguard<\/a>\u00a0showed\u00a0a total savings rate of 12%\u00a0in both 2023 and 2024\u00a0for its participants, a\u00a0historic\u00a0high.\u00a0\u00a0<\/p>\n Half of all private-sector workers\u00a0now participate in 401(k) plans<\/a>, a retirement-savings milestone, according to federal data.\u00a0Access to workplace retirement plans has been rising.\u00a0\u00a0<\/p>\n