Vanguard's Enroll Now Option Makes it Easier to Join 401(k) Plan

Small Annual Savings Bump Could Mean a 40% Difference in Retirement Savings

VALLEY FORGE, PA (June 3, 2014)—Nearly six in 10 of the employees who joined their company’s 401(k) retirement plan during pilot research on Vanguard’s new online Enroll Now™ process also chose to automatically increase their savings by a modest amount each year, which could give an extra boost to retirement savings of 40%—or an additional $100,000—over 20 years.

Enroll Now distills the online plan enrollment process into three critical decisions: how much to save per paycheck, whether to increase that amount annually and by how much, and which investments to choose. Suggested choices for each of those are determined by the employer and pre-populated on the simple, interactive form. With one click, employees can select or modify those choices. They can also bypass Enroll Now altogether and use the traditional enrollment process.

The pilot research was conducted from August to December 2013 on one large 401(k) plan, and the Enroll Now option is now being used by more than 530 plans. During the test research, Vanguard found that the tool led to:

  • 59% of the employees who used Enroll Now chose to automatically increase their savings annually. That small choice can really add up. For instance, a  hypothetical plan participant who earns $40,000, currently contributes 4%, and chooses an annual contribution increase of 2 percentage points could save an additional $100,000 over 20 years—an increase of 40%*.
  • A higher average contribution rate of 8.2%, compared with the average contribution rate of 7.5% chosen by Vanguard participants in 2013.
  • A 30% increase in completion of the online enrollment process.

Vanguard developed Enroll Now based on behavioral finance research showing that choice overload in retirement plans—in this case, the steps required to enroll in the plan, select a contribution rate, and choose an investment—can stifle any action at all. By offering employees pre-selected, easy-to-make choices, the entire process becomes less overwhelming and thus, more action-oriented. Vanguard is using the same concept with other “nudges” to help existing participants make saving and investment choices and other smart financial decisions.

 “With longer life expectancies and decades spent in retirement, it is more important than ever for American workers to save adequately for retirement. By providing participants with simple, pre-set, and one-click decisions, Enroll Now should enable more employees to easily take advantage of their workplace retirement benefit because they’re not overwhelmed by having to determine how much to save and which funds to invest in,” said Rebecca Katz, principal of Participant Strategy and Development at Vanguard.

Enroll Now was designed as an online experience to reflect the increasing desire of plan participants to make plan decisions online vs. paper forms. The more than 70% of Vanguard participants with access to a smartphone or tablet will also be able to use Enroll Now on those devices.

Vanguard earned a prestigious 2014 Gold Quill award from the International Association of Business Communicators for Enroll Now’s research innovation and data-driven approach.

*This calculation is based on a participant who earns $40,000 a year and currently contributes 4% of his or her pay. It also assumes an average annual return of 4%, that the participant elected a two-percentage-point automatic annual contribution increase, and that the participant’s plan caps that automatic increase at 15%. This hypothetical illustration does not represent any particular investment. The final account balance does not reflect any taxes or penalties that may be due upon distribution of the retirement assets. Withdrawals from a tax-deferred account are subject to a 10% federal penalty tax unless an exception applies. The annual increases continue until the participant’s contributions each year reach the plan’s contribution limit or the IRS contribution limit, whichever is less.

About Vanguard

Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies. As of April 30, 2014, Vanguard managed more than $2.57 trillion in U.S. mutual fund assets. Vanguard offers more than 160 index and actively managed funds to U.S. investors and more than 100 additional funds in non-U.S. markets. Vanguard provides investments to more than 5,100 defined contribution plans, including full-service recordkeeping and investment services to 3.6 million participants. Vanguard is also a major provider of investment and other services to defined benefit plans. For more information, please visit

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