From CNBC: 2024-05-24 12:21:20

Many Americans are unknowingly saving more for retirement, thanks to increasing use of automated enrollment and auto-escalation in company 401(k) plans. Workers should aim to save at least 15% of their annual pay, including employer contributions. However, many may not realize the extra funds being deducted from each paycheck.

Auto-escalation and automatic enrollment in 401(k) plans have become more widespread, with 64% of companies automatically enrolling workers in 2022. About 78% of these companies also automatically increase workers’ savings rate by 1% each year, aiming to help employees save more for retirement. Workers can opt out of this arrangement if desired.

Employers may hesitate to implement auto-escalation due to concerns about financial burden on workers. Among plans with automatic enrollment, only 40% automatically escalate savings for all employees, while 26% make it a voluntary choice and 22% do not offer it at all. The majority of plans limit automated worker contributions to 10% or less of annual pay, leaving the onus on workers to save more voluntarily.

Read more: Why you may be saving more in your 401(k) — and not even know it