Which Generation Is Saving Most for Retirement? (You May Be Surprised)
Written by
Heather Taylor
Edited by
Molly Sullivan
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Do you think you know which generation is saving most for retirement? Findings from a GOBankingRates survey on retirement reveal Gen Z is on track with their retirement savings.
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Of those who were surveyed, 67% of people between ages 18 to 24 cited fears of running out of money as their top retirement concern. The eldest of Gen Zers who were part of the next age group (25-34), also said running out of money was their biggest financial worry in retirement. To combat these fears, Gen Z is putting an average of 14% of their earnings toward retirement. Here’s how they’re saving for retirement.
Open and Contribute To a 401(k) Plan
One of the largest assets in a Gen Zer’s retirement portfolio is their 401(k) plan and/or IRA. Nearly 33% of Gen Zers (ages 18-24) surveyed have opened and set aside savings in these accounts.
Contributing to an employer-sponsored 401(k) plan, especially if you work for an employer who offers a matching program, is strongly recommended for anyone planning to retire. Gen Zers who are self-employed may also create a Solo 401(k) plan and use contributions in these plans to build wealth and decrease taxable income.
Open and Max Out an IRA
Gen Zers without access to a 401(k) plan may also save for retirement by opening an individual retirement account (IRA).
You can choose between a traditional IRA or a Roth IRA. Traditional IRAs are tax-deferred. This means you may be eligible for a tax deduction each year you contribute to the account. Earnings in a traditional IRA grow tax-deferred, but if you withdraw any money from the account before age 59½ you may be hit with a 10% penalty and be subject to ordinary income taxes.
Gen Zers who choose to open a Roth IRA can contribute a maximum contribution of $6,000 to the account under age 50 in 2022. Remember, with a Roth IRA you cannot contribute more than the maximum amount each year. You will also be subject to a 10% penalty if you withdraw earnings before age 59½, but there’s no penalty for withdrawing the money you contributed.
Diversify Investment Portfolios
Most Gen Zers surveyed by GOBankingRates have a fairly diversified retirement portfolio — already. Some of these assets include real estate (31%), stocks (45%), bonds (18%) and cryptocurrency (28%).
A diversified portfolio includes stocks, bonds, commodities and alternatives. If you’re not sure where to begin in diversifying your portfolio and have concerns about purchasing individual stocks for the “right” investment, a good recommendation is to purchase an index fund. This is an investment fund that follows a benchmark index, like the S&P 500, and allows you to invest in all the companies within this specific index.
The more you are able to diversify your portfolio, the more you’ll be able to yield returns in pace with or exceeding inflation and economic growth. Some portfolio assets, like bonds, may also protect cash that may not be afforded the most inflation protection.
Create an Emergency Fund
Whether you’re saving for retirement or need a nest egg for financial issues you’re facing right now, it’s a good idea to set aside at least six months’ worth of living expenses into an emergency fund. Gen Zers who keep this emergency fund in a savings account should make sure the account has a high or respectable yield.
Having an emergency fund and replenishing it if you dip into the fund for assistance will give you peace of mind for getting through challenging times and remind you of the value it has in your life.
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Methodology: GOBankingRates surveyed 997 Americans aged 18 and older from across the country between August 9 and August 11, 2022, asking sixteen different questions: (1) How much money do you currently have saved for retirement?; (2) How much money do you think you’ll need to retire?; (3) Realistically, at what age do you want to be retired?; (4) At what age did you start saving for retirement?; (5) What worries you financially about retirement? (Select all that apply); (6) Do you plan to work in retirement?; (7) What assets do you have in your retirement portfolio? (select all that apply); (8) How has the current inflation impacted your retirement plans?; (9) How much of your retirement do you plan to fund with Social Security?; (10) How do you feel about the future of Social Security when you retire?; (11) What percentage of your salary are you currently investing for retirement?; (12) Are you planning to move after your retirement?; (13) Where is your ideal place to retire?; (14) What government programs do you plan to use for your retirement? (select all that apply); (15) Do you have a pension plan?; and (16) How much do you think the average American has saved at the time they retire?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
