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Vanguard report finds only four in 10 Americans are financially ready for retirement

Having access to a 401(k) account provides a big boost

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Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.
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Key Insights

  • Only 42% of Americans are on track for retirement, according to Vanguard’s new Retirement Outlook.
  • Access to employer-sponsored defined contribution plans doubles the likelihood of reaching savings goals.
  • Gen Z and millennials show greater retirement readiness than older generations, but debt remains a major obstacle.

A new analysis from Vanguard paints a mixed picture of America’s financial future in retirement. While more workers are saving for retirement, fewer than half are currently on track to achieve financial security after leaving the workforce.

The Vanguard Retirement Outlook found that just 42% of Americans are on pace to maintain their standard of living in retirement. The study is based on Vanguard’s proprietary Retirement Readiness Model (VRRM), which uses decades of investor data and simulations to forecast outcomes based on savings behavior, access to retirement plans, and demographic trends.

The report stresses the powerful role that defined contribution (DC) plans—like 401(k)s—play in helping workers reach their goals. Vanguard found that employees with access to an employer-sponsored plan are twice as likely to be retirement-ready as those without.

Expanding access to these plans nationwide could improve retirement readiness by 19 percentage points, the company said. Working longer also helps: delaying retirement by just two years, until age 67, could add another 13 percentage points to readiness levels.

“Expanding access to defined-contribution plans and improving plan design has dramatically improved retirement outcomes,” said Fiona Greig, global head of Investor Research and Policy at Vanguard and co-author of the report. “Features like autoenrollment and higher default saving rates are helping more Americans build retirement wealth.”

The problem of debt

The outlook shows encouraging signs for Gen Z and millennials, who benefit from broader plan access and more robust saving structures than their parents did. About 47% of Gen Z and 42% of millennials are on track to retire comfortably, higher than the roughly 40% of Gen X and baby boomers.

Still, high debt burdens—especially student loans—continue to weigh on younger workers. Vanguard’s analysis found that millennials’ debt, which consumes 25% of their income, reduces their retirement success probability by nine percentage points.

“The financial strain of debt underscores the importance of financial wellness, advice, and emergency savings,” the report notes.

Older generations face shortfalls, but have options

Among older Americans, the numbers are sobering. The median-income baby boomer is expected to replace 56% of pre-retirement income, leaving an annual spending shortfall of about $9,000—roughly 24% of overall needs. Generation X fares slightly better, with a smaller annual gap of $6,000, or 18% of expected spending.

Vanguard suggests that tapping into home equity could help many retirees bridge the gap and achieve greater financial security.

“Retirement readiness isn’t just about saving—it’s about having the right tools, support, and access throughout a worker’s career,” said Kelly Hahn, Vanguard’s head of Retirement Research and co-author of the study.

The report concludes that improving access to DC plans and encouraging slightly longer working lives could have an outsized effect on national retirement readiness. Vanguard calls this a “shared responsibility” among policymakers, employers, and individuals.