The best way to start growing your lifetime retirement savings? Increase your personal savings by just 1 percent

Introduction

Since 2019 the share of small businesses with active retirement accounts, defined as a small business with a retirement savings account that is used by at least one employee, has increased by 58%. Much of this growth has happened because businesses with 10 or fewer employees have increased their benefit offerings to include retirement savings plans. In 2025, the median savings for small business employees depended heavily on their current incomes: people who made less than $30,000 per year saved about $200 per year and people making $90,000-$120,000 per year saved about $3,450, conditional on saving.

This raises an important question: how much should these workers expect to have available in retirement? We project these savings by looking at the median, or typical, savings and making very conservative assumptions: that the worker retires at age 65, earns 6% real market returns, and maintains the same savings behavior they have had since age 25. It does not assume income growth, annual contribution increases, or changes in job tenure, only a small, sustained increase in saving. We also assume that they’ve maintained their current savings behavior since they were 25 years old. 

We find that a one percentage point increase in current savings rates could increase overall lifetime savings by one-third. Additionally, due to changes set to go into effect in 2027 on how the federal government supports low-income retirement we project that most of these increases are among very low wage workers.

A 1 percentage point increase in employee savings could increase lifetime savings by 32%

If flat deferral rates and high inflation have eroded retirement savings, the natural question is how sensitive long-term outcomes are to changes in saving behavior. Our projections suggest that even very small increases in savings rates can have large effects over time.

If a small business employee increased their deferral rate by just one percentage point and changed nothing else about their earnings or career, their lifetime retirement savings could increase by roughly 32%.

Starting in 2027, federal policy will amplify the impact of these small changes for lower-income workers. The Saver’s Match will provide up to a 50% federal match, capped at $2,000, for eligible workers earning less than $35,500 if single or $71,000 if married filing jointly. When a qualifying worker increases their savings rate, they are not only saving more themselves, but also unlocking additional federal matching dollars on each new dollar contributed.

For workers with monthly incomes below $2,500, this interaction between personal savings and the Saver’s Match has a compounding effect. In our projections, a one-percentage-point increase in deferrals could raise lifetime retirement savings by 74% for these workers.

Why small increases in savings have larger effects for the typical Black and Hispanic worker

The gains from small increases in savings are not evenly distributed. Because Black and Hispanic small business workers are more likely to earn incomes below the Saver’s Match eligibility thresholds, they stand to benefit disproportionately when they increase their retirement contributions.

In our projections, a one-percentage-point increase in deferral rates raises projected lifetime retirement savings by 42% for the typical Black worker and 46% for the typical Hispanic worker. By comparison, the same increase raises lifetime savings by about 30% for white workers and 28% for Asian/Pacific Islander workers.

These differences are not driven by differences in saving behavior or investment returns. Instead, they reflect how the Saver’s Match interacts with the income distribution. Workers below the eligibility threshold receive additional federal matching dollars on each new dollar saved, while workers above the threshold do not. As a result, identical increases in personal savings generate different total gains.

This two-step mechanism, higher personal contributions unlocking additional government matching, means that even modest increases in savings rates can translate into much larger lifetime gains for Black and Hispanic workers than for workers with higher incomes.