IRS raises 401(k) contribution limits for 2026
IRS increases 401(k) and catch-up contribution limits for 2026, allowing workers to save up to $32,500 for retirement.
A new report on retirement savings paints a worrisome picture: Fewer workers are saving, and only top earners are increasing their contributions from year to year.
The analysis, released Nov. 18 by the human capital management company Dayforce, draws on more than 1 million anonymized records for workers from 2021 through 2024. It is titled The Retirement Divide.
Much available data on retirement savings comes from individual investment firms and focuses only on their clients. This analysis covers the entire full-time workforce. The report says it represents “the fullest picture to date of the true state of retirement security in America.”
The findings show many American workers losing ground on retirement savings between 2021 and 2024, a span marked by rising inflation and interest rates, dwindling savings and mounting debt.
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.
The average amount contributed to a retirement 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%.
But most of the gains came from the top earners.
Top earners benefit most from 401(k)s
Among full-time workers earning between $15,000 and $50,000 a year, retirement-plan participation dropped from 58% in 2022 to 52.9% in 2024.
Participation rates dropped, as well, for workers earning between $50,000 and $150,000. Only employees earning more than $150,000 posted an increase in retirement-savings participation.
“Nearly all of those gains have gone to higher-income workers,” said Jason Rahlan, global head of sustainability and impact at Dayforce. He said the report “should serve as both a wakeup call and a call to action.”
The average retirement savings rate dipped from 2022 to 2024 for every group of earners Dayforce studied, except the top tier:
For those earning $15,000 to $50,000, the retirement savings rate declined from 4.9% to 4.6% of income, less than half the savings rate for top earners. For those earning $50,000 to $100,000, the savings rate fell from 9.6% to 9.3%.
Total retirement contributions declined, as well, for all but the highest earners:
For those earning $15,000 to $50,000, average annual contributions slipped from $1,918 in 2022 to $1,815 in 2024. For those earning $50,000 to $100,000, average contributions fell from $6,814 to $6,630. Older generations are lagging in retirement saving
Older generations of Americans are lagging in retirement saving, the report found.
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%.
But retirement-savings participation fell for Gen X and boomer workers, to 82% and 78.7%, respectively.
White and Asian workers are more likely to save for retirement than Black and Latino employees, the report found, although all groups are making some progress.
Here are retirement savings rates by race in 2024:
Asian: 11.3% White: 10% Black: 6.8% Latino: 7.5%
And here are average retirement contributions by race in 2024:
Asian: $12,939 White: $11,676 Black: $5,404 Latino: $5,389 More workers are borrowing from 401(k)s
More workers are borrowing money from their retirement accounts, the report found, transactions that deprive the saver of valuable capital gains while they repay the funds.
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%.
Prior research shows progress in retirement saving
The Dayforce report runs counter to much previous retirement savings research, which shows workers making steady upward progress.
In the first three months of 2025, the total 401(k) savings rate on Fidelity retirement plans reached 14.3%, an all-time high.
An annual report from Vanguard showed a total savings rate of 12% in both 2023 and 2024 for its participants, a historic high.
Half of all private-sector workers now participate in 401(k) plans, a retirement-savings milestone, according to federal data. Access to workplace retirement plans has been rising.
The ranks of 401(k) millionaires are growing, thanks to increased retirement savings and years of stock market gains.
Here’s how employers can encourage retirement saving
Employers can help lower-income workers save for retirement, researchers say, by making it easier for them to start saving and keep saving.
One step is to allow workers to open a 401(k) account immediately after starting work, rather than making them wait for a period of months, said Matt Bahl, vice president and head of workplace solutions at the nonprofit Financial Health Network.
Another tool is auto-portability, a mechanism that automatically transfers a retirement plan to a new employer when someone changes jobs.
Employers can help lower-paid workers save by automatically enrolling them in 401(k) accounts, Bahl said, and by making “unconditional” contributions that aren’t contingent on an employee contribution.
Finally, Bahl said, employers should “continually think about simplifying the investment options,” so that workers don’t face difficult choices in how to allocate their savings.