This Generation Is Ramping Up on Retirement Savings the Most

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You may be surprised by which one it is. 

Saving for retirement is essential. Without personal savings, you might struggle to pay your bills once your senior years roll around.

But prioritizing your savings isn’t the easiest thing to do when you’re fairly young. That’s because you might have more pressing goals to address, like paying off your credit cards or building yourself an emergency fund. And given the way inflation has surged over the past year and change, you may be having trouble finding money for your IRA account or 401(k) because you’re spending your entire paycheck on things like rent, utilities, and food.

It’s therefore surprising — in a good way — to learn that members of Gen Z have seen their retirement account balances increase more so than any other generation over the past quarter. And if younger workers keep up the great work, they could set the stage for a very comfortable retirement.

Younger generations are pushing to save

Fidelity recently reported that the average IRA balance as of the end of 2022 was $104,000, while the average 401(k) balance was $103,900. And while Gen Zers, because of their age, tend to have smaller balances than their older counterparts, their balances increased 23% from 2022’s third quarter to its fourth — a higher rate of increase than any other age group.

What’s even more notable is that retirement plan balances among Gen Zers are up 14% compared to the end of 2021. And that makes Gen Zers the only generation to be seeing positive growth in their retirement savings over the past year.

Now to be clear, the reason so many retirement accounts are down is none other than 2022’s volatile stock market — a market that sorely underperformed. But the fact that Gen Zers’ retirement plan balances are up is likely due to them ramping up their contributions. And that’s a very positive thing.

Prioritize your retirement savings if you can

If you’re struggling to keep up with your bills these days due to inflation, then you might have to temporarily pause your retirement plan contributions to get caught up. But if you’re in a good place financially and can manage to make IRA or 401(k) plan contributions, do it now — even if you’re a good 40 years or more away from retirement.

The longer you give your money to grow, the larger a nest egg you stand to accumulate. And so making an effort to sock away even as little as $100 a month in a retirement plan could make a huge difference over time.

In fact, let’s say you contribute $100 a month to an IRA or 401(k) over the course of 40 years, all the while investing that money at an average annual 8% return, which is a reasonable return for an investment window that lengthy. All told, you stand to accumulate about $311,000 in your lifetime — and that assumes you never increase your $100 monthly savings rate.

Now ideally, your savings rate will go up as your salary increases. The point, however, is that saving for retirement over a long window could do you a world of good. And so it’s great to see that Gen Zers are ramping up on retirement savings — even though that milestone isn’t anywhere close.

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