Full-time employees cut their 401(k) participation and contribution rates last year amid an affordability crunch, new research shows.
Americans are sliding backward in preparing for retirement, with employees reducing their annual contributions to their 401 accounts last year, according to new research from payroll firm Dayforce.Full-time workers cut their contribution rate in 2025 to 8.
9%, from 9.2% a year earlier, while one in four workers reduced their annual savings in their 401 or other types of employer-sponsored accounts, the study found. The dip — the first decline since Dayforce began tracking the measure three years ago — was sharpest among workers with annual income of $50,000 to $100,000.That decline may point to the financial pressures on middle-class Americans, with some cutting retirement contributions to boost take-home pay, Jason Rahlan, global head of sustainability and impact at Dayforce, told CBS News. The analysis also found that almost 20% of full-time workers tapped their 401 plans for loans last year — the highest share since the company started tracking the data. 'This should be a warning sign,' Rahlan told CBS News. 'It may be a sign of financial strain,' pointing to workers setting aside their retirement goals to focus on more immediate budget issues. About half of Americans said they were more financially stressed heading into 2026 than a year earlier, according to a December study from insurance firm Allianz Life. Covering day-to-day expenses was the biggest source of concern, the analysis found. 'Seeing the crunch'Although the dip in retirement contributions is relatively small, it could result in a 'real impact over the long term' if that trend continues, given the importance of continuously saving throughout one's career, noted Matt Bahl, vice president at the Financial Health Network, a nonprofit focused on financial issues that contributed to the report.'When you are struggling day to day, it's hard to focus on your long-term goals,' Bahl said. 'We're really seeing the crunch for those middle-income earners — it speaks to the affordability crisis.'The decline in retirement savings is likely to continue this year, Rahlan and Bahl said, pointing to projections showing that households will spend an additional $740 on gasoline this year due to the jump in global oil prices stemming from the Iran war. Other financial research supports Dayforce's findings. In March, for example, retirement planning giant Vanguard found that a record share of Americans tapped their retirement savings accounts last year to cover emergency expenses. In 2025, 6% of people enrolled in 401 plans managed by Vanguard made so-called hardship withdrawals from their accounts, up from 5% in 2024. Loans from retirement accounts are slightly different from hardship withdrawals, as the former don't incur taxes and penalties. But loans must be repaid to the retirement account. By contrast, hardship withdrawals — which can be made for emergencies such as medical treatment or to avoid foreclosure or eviction — don't need to be repaid. Generational differencesTotal retirement plan contributions and savings rates declined for most employees last year regardless of their age, including baby boomers, Gen Xers and millennials, Dayforce found. However, one generation bucked the trend: Gen Z workers, who were born between 1995 and 2009, the firm's analysis found. While their retirement plan savings rate tends to be lower than that of older workers, they were the only generation to boost their contributions, with the typical Gen Z employee increasing their contribution rate to 6.2% last year from 5.9% in 2024, Dayforce found. 'They have experienced the greatest gains of any generation in participation savings rate and contributions,' Rahlan said. Younger workers may have learned from the mistakes of older generations, especially those who were the first to enter the workforce as the retirement system shifted from pensions to 401 plans, where the onus is on workers to make contributions and investment decisions, Bahl said.'They learned from both the good and bad behaviors' of older Americans, he said.
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