Retirement account balances hit a record average of $167,970 at year-end 2025, a 13% jump from the prior year, driven by strong stock market performance and record-high savings rates, according to Vanguard’s annual “How America Saves 2026” report covering nearly 5 million participants.
The gain marks the latest milestone in a multi-year rebound for retirement savings. The prior year-end 2024 average was $148,153, meaning the typical account holder accumulated nearly $20,000 in a single year through a combination of personal contributions, employer matches, and market gains.
The median balance tells a sharply different story. At $44,115, the median sits far below the average, reflecting the unequal distribution of retirement wealth. At a standard 4% withdrawal rate, the median balance yields roughly $147 per month—insufficient to cover basic living expenses, according to Fortune’s analysis of the Vanguard data.
Market returns were the primary engine of these gains. Vanguard participants saw average total returns of 19.3% in 2025, fueled by a strong year for equities and bonds. The S&P 500 rose 16.9% for the year, the Nasdaq Composite climbed over 20%, and the Russell 2000 gained around 13%, creating conditions that lifted even modest account balances.
Beyond market performance, record-high savings rates contributed to the record balances. The average participant saved 7.6% of their paycheck, with the total contribution rate—including employer contributions—reaching 12.1%, up from 11.6% four years earlier, according to Vanguard’s report shared by Yahoo Finance. More than half of all participants increased their savings rate during 2025.
Automatic enrollment and plan design have emerged as the real drivers of these gains. David Stinnett, head of strategic retirement consulting at Vanguard, told Yahoo Finance that “over the past 25 years, the retirement savings system has shifted from one reliant on individual action to one powered by defaults.” Participation has climbed from 65% to 86% as employers increasingly default workers into saving at higher rates and provide more generous matches. Over 6 in 10 plans now default new employees at a 4% deferral rate or higher.
Target-date funds, which automatically shift from stocks to bonds as workers age, are also playing a role. More than 8 in 10 Vanguard 401(k) participants used target-date funds in 2025, helping them stay disciplined during market volatility.
Yet the record gains mask a troubling countercurrent: hardship withdrawals hit an all-time high. Six percent of Vanguard participants made a hardship withdrawal in 2025, up from 5% in 2024 and triple the pre-pandemic rate, according to Yahoo Finance’s report on the Vanguard data. The median withdrawal was $1,900. More than a third of these withdrawals were used to avoid home foreclosure or eviction, with medical expenses and home repair rounding out the top reasons.
The rise in hardship withdrawals reflects what Vanguard researchers called “pressures such as inflation and rising interest rates” that contribute to financial strain. It also reflects easier access: as of year-end 2025, only 10% of plans now require documentation of financial need for hardship withdrawals, down from a historical requirement for all participants.
The gap between the record average and the struggling median underscores a structural inequality in American retirement savings. Those who benefit most from record balances tend to be higher-income workers with longer tenures and the discipline to max out contributions. Only 14% of savers contributed the 2025 maximum of $23,500 ($31,000 for those 50 and older), and those who did were disproportionately older, higher-income, and long-tenured, according to Vanguard data shared via Yahoo Finance.
For context, baby boomers hold nearly $90 trillion in wealth and control over half of U.S. household assets, while younger cohorts struggle to accumulate savings. The record 2025 gains, while headline-grabbing, have not closed the gap between those with robust retirement accounts and those relying on Social Security benefits averaging $2,080 per month in 2026.
Sources
- Vanguard — How America Saves 2026 report; average 401(k) balance of $167,970, 13% year-over-year increase, median balance of $44,115, 16% increase, 6% hardship withdrawal rate, 7.6% average employee contribution, 12.1% total contribution rate, automatic enrollment impact
- Fortune — Vanguard’s alarming state of retirement in 2026; analysis of average vs. median balances, hardship withdrawal context, plan design insights
- Yahoo Finance — Retirement savings set record high — but so do hardship withdrawals; 19.3% total returns for 401(k) participants in 2025, S&P 500 16.9% return, Nasdaq 20%+ return, Russell 2000 13% return, hardship withdrawal reasons and trends, David Stinnett commentary on automatic enrollment
