How Much Does Gen Z Have Saved for Retirement — and How Much Should They Have?

A happy young adult woman enjoys time at her home, talking on the phone in the kitchen while drinking a cup of coffee.
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It makes sense that Gen Z doesn’t have major retirement savings yet — after all, they’re still fresh members of the workforce, with a good portion still in school. That being said, it’s important for them to start taking steps now to ensure they will be prepared for retirement in the future.

A recent survey conducted by GOBankingRates found that 47% of 18- to 24-year-olds have not started saving for retirement. Additionally, of those who have started saving, the majority have less than $10,000.

Here’s a breakdown of Gen Z’s retirement savings and expert insight into how much young Americans should set aside for their future.

Nearly Half of Gen Z Hasn’t Started Saving for Retirement

According to GOBankingRates’ survey, most Gen Zers aren’t prioritizing retirement savings, with 47% having $0 saved so far. Even for those who are looking toward retirement, the amount they have saved is minimal. 

Most Gen Zers who have started saving have $10,000 or less, with 31% of 18- to 24-year-olds having this amount set aside. Due to the oldest members of this generation being 26, it may come as a surprise that few members of this age group have saved more than $10,000. The survey showed that 8% have $10,000-$30,000 saved up and 7% have $30,000-$50,000. A mere 4% have $50,000-$70,000, and almost no one in this generation has above $70,000 set aside.

Are You Retirement Ready?

Since Gen Z is very young and likely to be less familiar with 401(k)s, IRAs or other retirement savings vehicles, it’s understandably daunting to start saving. Retirement for them is also likely decades away, making it more of an abstract goal. But experts say Gen Z should still be thinking about retirement and socking away their extra money now. Let’s find out why.

Save at Least 10% of Your Income

It’s important for Gen Zers to find a healthy balance between how much they want to prepare for their future retirement and how much money they want to be able to spend now. When determining how much you should set aside, there are a few methods you can consider. 

“One rule of thumb is to use what’s considered a safe withdrawal rate,” said Barbara Black, CFP and senior vice president at RMB Capital. “Two to four percent is widely considered a ‘safe range’ when living off your assets in retirement. Using a safe withdrawal rate, you can work backward with your target income amount in retirement and an assumed rate of return on your savings.”

You can also set aside a percentage of your income for retirement. A general guideline for saving according to earnings is to save 10%-15% of your income for retirement, according to Black.

How To Start Saving as a Gen Zer

As the newest members of the workforce, Gen Zers are still learning how to manage their adult finances. For those who haven’t started saving, there are a few options for this generation to take advantage of in order to prepare for their financial future.

Are You Retirement Ready?

Contribute To Your Company’s Retirement Savings Plan

If your place of employment offers a company retirement plan, this is one of the easiest ways to start saving for retirement.

“Reach out to your HR department and see what options they have available,” said Gerald Grant III, retirement planning specialist at Equitable Advisors. “Many of these plans have a matching contribution, which is more your employer will put into your plan to incentivize you for participating in the plan.”

If your employer does offer a match, be sure to take advantage of it. 

“There aren’t many things in life that come freely, but the employer match is one of those things. Take advantage!” said Melissa Shaw, wealth management advisor at TIAA. “Set up a contribution percentage that, at least, matches the percentage your employer will contribute to your retirement plan (usually 3%-6% of your income). This means that if you are earning $40,000 per year and you contribute 5% — [which is] $2000 — your employer will also contribute $2,000 to your retirement plan.”

What If My Employer Doesn’t Offer a Retirement Plan?

If your employer doesn’t offer a retirement plan, there are still plenty of other savings options available. 

“You can save on your own inside of a traditional or Roth IRA,” Grant said. “These allow you to put away funds and take advantage of the respective tax benefits associated with the accounts.”

“Roth IRAs are a particularly great vehicle to start saving early — the benefit of a Roth IRA is that your contributions grow tax-free and you aren’t taxed on any distributions later in life, assuming you meet certain requirements,” Black said. “If you expect your income to be higher in the future than it is today, this is the rationale to save to a Roth IRA.”

Are You Retirement Ready?

What If I’m Self-Employed? 

Self-employed Gen Zers can save for retirement too. Starting a SEP IRA is a great way for freelancers and self-employed young people to set aside funds for their future. 

“For those who are self-employed, consider a SEP IRA where you can contribute up to 25% of your income (up to $66,000 in 2023), which is tax-deductible,” Black said. “The higher contribution limits can create large tax deductions from your self-employment income.”

Why It’s Important To Start Saving Early

Due to Gen Z being the farthest generation from retirement in the workforce, it makes sense that they haven’t started saving for a goal that is decades away. However, the key to retiring comfortably is starting early in order to allow your investments to grow over time. 

“The earlier you start, the less you’ll need to save along the way due to compounding interest,” Black said. “It’s simple — the longer your money has a growth on top of growth, the more you’ll have in the end.” 

Creating positive investing habits now can set you up for a much more comfortable future. The key to accumulating retirement savings hands-free is allowing compound interest to work its magic over time. 

“If you plan to set aside $5,000 a year for retirement, waiting just 10 years to start saving can cost you nearly half a million dollars by the time you’re ready to retire,” said Mark Henry, CEO of Alloy Wealth Management

“Another benefit of saving early and on a regular schedule is that you’re investing into the market at different prices along the way — sometimes high but other times low, and that’s the sweet spot,” Black said.

Are You Retirement Ready?

Investing over a long period of time should give you peace of mind that once you reach retirement age — whatever that means for you — you can hang up your work boots, work tie, whatever, and live out your golden years without worrying about what’s in the bank.

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