Generation Z has taken over the retirement savings game, leaving their predecessors in the dust. They have come to dominate the arena of financial planning and investing for the future. Benzinga looks at a recent study to explain this development.
According to a report by Vanguard, workers ages 18 to 24 were 32% more likely to invest in their workplace retirement plan than their older colleagues were at the same age. This is impressive considering younger generations typically have lower participation rates because of a lack of knowledge and lower income. In fact, Gen Z's participation rate was more than double that of their counterparts in 2006.
The study also found from 2006 to 2021, 97% of workers ages 18 to 24 invested between 41% and 99% of their 401(k) savings in stocks, compared to just 25% in 2006.
Financial experts say this could be attributed to a higher comfort level with technology and the automation of investment processes in 401(k) plans. Nilay Gandhi, a certified financial planner and senior wealth adviser at Vanguard, said, "Gen Z investors have grown up in a world where technology is fully a part of their daily lives. This generation is the most active mobile user and can use their devices to gather information and manage their finances — including investing in stocks — through various technology platforms."
Investing early in a 401(k) can be one of the best ways to build a substantial retirement fund. The more time funds are invested in the stock market, the more time they have to grow and compound. Financial planners suggest that many workers will need over $1 million to retire comfortably, especially with inflation.
In an encouraging statement, Gandhi highlights the potential benefits of investing in stocks for wealth accumulation over the long term.
"Stocks can be a powerful tool for wealth accumulation and give money a higher potential to grow over the long term," he said. He also emphasizes that savings rates, a well-balanced portfolio, costs, and discipline are crucial aspects of investment success.
Gandhi notes that Gen Z investors have a long time horizon to retirement, which makes taking the first step to saving early and often crucial.
"We are encouraged by the positive savings behaviors we are observing with younger generations," he said. "Gen Z savers, on average, have higher account balances than their predecessors in part because they are investing earlier and often and taking advantage of retirement plan benefits."
Many Gen Z employees are graduating with less debt and are highly educated, which allows them to put aside more for their retirement. Younger workers who are saving more, maintaining a long-term perspective, and holding balanced portfolios have the right recipe for achieving strong financial security in retirement.
This story was produced by Benzinga and reviewed and distributed by Stacker Media.
FAQs
The youngest generation in the workforce has saved almost three times the amount Gen X households had saved in defined contribution plans at the same age, according to ICI data.
Are Gen Z saving more for retirement? ›
Gen Z households have nearly three times more assets in their DC plan accounts (adjusted for inflation) than Gen X households did at the same age (in 1989). More than half of DC account owners younger than 35 said they probably wouldn't save for retirement if not for their workplace plan.
In what age group do people save the most for retirement? ›
Baby Boomers are saving the most for retirement, according to Transamerica Center. Aim to save at least 15% of your pre-tax income and make sure you contribute enough to your 401(k) to get the full benefit of your employer match if one is offered.
Which generation is about to retire? ›
Gen X is typically defined as those born between 1965 and 1980. Its oldest members are several years away from retirement, but they are already starting to think about where they will live in their 70s, 80s and even 90s.
Which generation spends the most money? ›
In 2022, the average expenditures in a household led by a Millennial in the United States came to 74,782 U.S. dollars per year. The only generation with higher expenditures were households led by someone from Generation X with around 91,382 U.S. dollars per year.
Which generation is the greatest? ›
The Greatest generation, those born 1901 to 1927, are known to have been born and come of age in the “American Century” of economic growth, technological progress, and mostly military triumph. The Silent generation describes adults born from 1928 through 1945.
Why Gen Z is a better generation? ›
They are constantly connected, always on the go, and extremely tech-savvy. As a result, Gen Z is often lauded for being entrepreneurial, innovative, and open-minded.
Are baby boomers not saving enough for retirement? ›
Most peak boomers aren't financially ready for retirement
About 53% of "peak boomers," or the tail end of the generation who will turn 65 between 2024 and 2030, have less than $250,000 in assets, the new study found.
Does Gen Z like to save money? ›
According to the study, 3 out of 4 Gen Zers say they'd rather have a better quality of life than extra money in the bank.
How much does the average 70 year old have in savings? ›
The Federal Reserve also measures median and mean (average) savings across other types of financial assets. According to the data, the average 70-year-old has approximately: $60,000 in transaction accounts (including checking and savings) $127,000 in certificate of deposit (CD) accounts.
The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of May 2024, the average check is $1,778.24, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
Which generation will live longer? ›
It is a known fact that lifespan increases with each generation. For baby boomers, the average life expectancy is 70 years, for Gen X its 85, and newer generations like Gen Z and Alpha will likely exceed the 100-year mark.
What is the silent generation called? ›
The Silent Generation, also known as the Traditionalist Generation, is the Western demographic cohort following the Greatest Generation and preceding the baby boomers. The generation is generally defined as people born from 1928 to 1945.
Which generation is most financially responsible? ›
Baby boomers feel the most financially responsible of the generations, with 86.3% claiming financial responsibility. The numbers were lower for Generation X (74.3%), millennials (73.0%) and Generation Z (71.8%).
Which age group saves the most money? ›
Those aged between 50 and 59 have the highest amount stashed away with the total value of their savings and investments sitting at $14,225. The youngest group – 18 to 29-year-olds – have the smallest saving and investment balances on average.
What generation holds the most wealth? ›
Wealthiest Generation: Baby Boomers
In aggregate, their total net worth is $78.55 trillion.
What generation is the most frugal? ›
The Silent Generation are frugal and conservative, valuing saving over spending. Baby boomers are willing to spend on leisure and luxury items without worrying about sustainability.
