The Rise of the Auto-Investor: How Automation Is Saving America's Retirement

Is it possible passive investing IS driving the market higher?

Author

Todd Ballenger
July 25, 2025

❝

"Don’t put your purpose in one place and expect to see progress made somewhere else."

Epictetus

Vanguard's 2025 How America Saves report is out, and I found it interesting. I saw it mentioned in a recent newsletter from Roccy Defrancesco (smart guy you should follow). Given we share a goal of financial education (or at least attention)…

Here are some highlights:

💰 How Retail Investors Are Saving — And How Well It’s Working

America’s retail investors—those everyday workers funding their retirement through defined contribution (DC) plans—are making real progress. According to Vanguard’s How America Saves 2025, we’re seeing a quiet financial revolution built on automation, disciplined behavior, and smarter plan design.

✅ 1. More Americans Are Saving—and Sooner

  • Automatic enrollment is doing the heavy lifting: 61% of plans now auto-enroll participants, up from 26% in 2009. This has driven participation rates to a record 85% for plan-weighted data.

  • Among plans with auto-enrollment, the participation rate soars to 94%, compared to 64% for voluntary plans.

  • 76% of plans let employees start saving immediately when they join. That’s an all-time high.

Takeaway: People save more when the default is yes. Auto features are eliminating inertia.

💸 2. Savings Rates Are Rising Steadily

  • Average employee deferral rate: 7.7% (a record high).

  • Total average contribution (employee + employer): 12.0%.

  • 45% of participants increased their savings rate in 2024, either manually or through automatic escalators.

  • Catch-up contributions are being used by 16% of eligible participants, steady over the last few years.

Takeaway: Nearly half of participants are boosting their savings annually—voluntarily or automatically.

📈 3. Account Balances Are Growing

  • Average balance: $148,153 (↑10% YoY).

  • Median balance: $38,176 (up from $35,286 in 2023).

  • This growth is driven by strong market performance (+25% for the S&P 500) and consistent contributions.

Takeaway: Long-term discipline and market growth are delivering results—even amid economic headwinds. Will this be enough, I don’t think so, but…this is after a really strong market, so may need to increase savings!

🧠 4. Portfolios Are Smarter Than Ever

  • 67% of participants now use a professionally managed allocation (target-date fund or managed account).

  • 84% use target-date funds, up from 80% in 2020.

  • 78% of investors have a balanced portfolio. Extreme allocations (100% equity or fixed income) are down to just 7%.

Takeaway: Many investors are letting go of DIY speculation and embracing diversified, long-term strategies. This does feel like Vanguard talking its book.

🔓 5. Most Participants Are Preserving Their Assets

  • Only 3% of assets eligible for distribution were taken in cash.

  • 97% of assets were preserved through rollovers or staying in-plan.

  • Hardship withdrawals rose to 4.8%, a modest increase, suggesting some financial stress remains.

Takeaway: Most participants aren’t cashing out—they’re staying invested, even when changing jobs.

⚖️ 6. Demographic Gaps Still Exist

  • Participation climbs with income: only 31% of those earning < $15K participate vs. 95% of those earning > $150K.

  • Younger workers (<25): only 54% participate.

  • Tenure matters: 70% of those with <2 years participate, but it jumps to nearly 90% for those with 4+ years.

Takeaway: Automatic features are leveling the field, but low-income and new employees still lag.

🎯 Final Thought: The System Works—When Automated

The data shows a clear pattern: when participation is automatic, contributions are encouraged, and investments are managed professionally, retail investors thrive. But gaps remain—especially for the youngest, lowest-paid, and most financially stressed.

If you're advising clients, managing a plan, or just trying to optimize your own retirement savings, the playbook is clear:

  • Use automation.

  • Increase savings rates incrementally.

  • Diversify investments using target-date or managed options.

  • Stay the course through job changes and market volatility.

The retail investor isn’t just surviving—they’re building wealth.

Take the bullets above and apply them to anything you are doing.

Automate, compound what’s working, diversify into 1 or 2 projects max per quarter, and stay focused on the thing that’s working now!

Sources:

a BORROW SMART CONCEPT
Yoda’s Advice

On vacation, so this will have to do for this week…

LIABILITIES
What’s Happening?

you can see how finance and real estate was the market, and now it’s a small sliver as tech takes over - but lending is still a pretty, pretty big deal

“It is silly and pointless to try to get from another person what one can get for oneself.” Epictetus

REAL ESTATE
What’s Happening?

National Map of Home Price Changes – Home Economics

US home prices are higher today than one year ago, but a third of ZIP codes are now lower—and national prices are rapidly decelerating.

home-economics.us/national-map-of-home-price-changes/?utm_source=convertkit&utm_medium=email&utm_campaign=A+Very+Useful+Map+-+18373813

the headline is fascinating to me… more buyers over age 70 than under age 35

prices are softening

Cool map from Keeping Matters Current, Foreclosures are NOT adding to inventory!

“Remember, it is not enough to be hit or insulted to be harmed, you must believe that you are being harmed.”

Epictetus

ASSETS
What’s Happening?

whipsaw of different markets rising and falling of late

July is the top month (next to November) for All-Time Highs

weird

money supply is liquidity and liquidity makes the markets go up and down (like water in a tub)

returns over 20 years

returns over 10 years

another look at 10 year returns

bitcoin has been firming up, more long term diamond hands

the market is a CALL option driven market - everyone needs to learn options

profits drive earnings and earning drive prices

ON BEING HUMAN
What’s Worth Sharing?

This is me when I let myself off the leash!

“Whenever anyone criticizes or wrongs you, remember that they are only doing or saying what they think is right.” Epictetus

being alive is expensive

and there are less of us to share the costs of a modern system

seems people are being pulled toward the equator

DOPAMEMES
And Other Happy Moments…

Is this your security system for ensuring your brighter future?

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AI
and The Future of Work…

the irony of using coal to power a data center :-)

still important job creator

8th country in the world for self-made billionaires - surprising - AI will likely create more single person corporate billion dollar winners, maybe the first solotrillionaire?