IRS increases 401(k) contribution limits for 2026
The IRS will increase 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 highlights a worrying picture. The number of workers saving is decreasing, and only high-income earners are increasing their contributions year by year.
The analysis, released Nov. 18 by human capital management firm Dayforce, is based on more than 1 million anonymized records of workers from 2021 to 2024. The title is “Retirement Inequality.”
Much of the available data on retirement savings comes from individual investment companies and focuses solely on their customers. This analysis covers all full-time employees. The report states that the report “provides the most complete picture to date of the true state of retirement security in America.”
The findings show that many U.S. workers are losing their retirement savings between 2021 and 2024, a period marked by rising inflation and interest rates, declining savings, and rising debt.
The percentage of full-time workers participating in retirement savings plans fell from 79.4% in 2021 to 78.7% in 2024, according to the analysis.
During this time, the average contribution to a retirement account increased from $8,370 in 2021 to $9,488 in 2024. The average savings rate similarly increased from 8.8% to 9.3%.
But most of the gains went to high earners.
High-income earners benefit most from 401(k)s.
Among full-time workers earning between $15,000 and $50,000 a year, participation in retirement plans fell from 58% in 2022 to 52.9% in 2024.
Participation rates among workers earning between $50,000 and $150,000 declined as well. Participation in retirement savings increased only among employees with incomes above $150,000.
“Nearly all of that benefit went to high-income workers,” said Jason Lahran, Dayforce’s global head of sustainability and impact. He said the report “should serve as both a wake-up call and a call to action.”
Average retirement savings rates declined from 2022 to 2024 for all but the top earner groups surveyed by Dayforce.
- For people earning between $15,000 and $50,000, their retirement savings rate fell from 4.9% of their income to 4.6%, less than half the savings rate of high-income earners.
- The savings rate for people with incomes between $50,000 and $100,000 fell from 9.6% to 9.3%.
Total retirement contributions also fell for all but the highest earners.
- The average annual contribution for those making $15,000 to $50,000 decreased from $1,918 in 2022 to $1,815 in 2024.
- For those making $50,000 to $100,000, the average contribution decreased from $6,814 to $6,630.
Older generations are lagging behind in saving for retirement
The report found that older Americans are lagging behind in saving for retirement.
From 2022 to 2024, Gen Z workers’ participation in retirement savings plans increased from 64% to 68.7%. Millennial participation increased from 78.4% to 80.2%.
However, Gen X and Boomer participation rates in retirement savings fell to 82% and 78.7%, respectively.
The report says white and Asian workers are more likely to save for retirement than black or Latino employees, but all groups are making some progress.
Here are the retirement savings rates by race in 2024:
- Asian: 11.3%
- White: 10%
- Black: 6.8%
- Latino: 7.5%
And the average retirement benefits by race in 2024 are as follows:
- Asian: $12,939
- White: $11,676
- Black: $5,404
- Latino: $5,389
More workers are borrowing from their 401(k)
More workers are borrowing money from their retirement accounts, the report says, a transaction that deprives savers of valuable capital gains while they pay back the funds.
The share of white savers who took out loans through their retirement plans rose from 14% in 2022 to 14.9% in 2024. Loan interest rates for Black and Latino savers rose from 25.3% to 26.4%.
Previous research shows progress in saving for retirement
Dayforce’s report contradicts many previous retirement savings surveys that show steady increases in workers’ savings.
In the first three months of 2025, the Fidelity Retirement Plan’s total 401(k) savings rate reached an all-time high of 14.3%.
According to Vanguard’s annual report, participants’ combined savings rate was 12% in both 2023 and 2024, a historic high.
Half of all private sector workers now participate in a 401(k) plan, a milestone for retirement savings, according to federal data. Access to workplace retirement plans is increasing.
The number of 401(k) millionaires is increasing due to increased retirement savings and the rise in the stock market over the years.
Here’s how employers can encourage retirement savings
Employers can help low-income workers save for retirement by making it easier for them to start saving and keep saving, researchers say.
Matt Bahr, vice president and head of workplace solutions at the nonprofit Financial Health Network, said one step is to allow workers to open 401(k) accounts as soon as they start work, rather than making them wait months.
Another tool is autoportability. This is a mechanism that automatically transfers a retirement plan to a new employer when someone changes jobs.
Employers can help low-wage workers save by automatically enrolling them in 401(k) accounts and making “unconditional” contributions that aren’t contingent on employee contributions, Barr said.
Finally, Barr said employers should “continue to consider simplifying investment options” so that workers are not faced with difficult choices about how to allocate their savings.
