Gen Zers are saving 14% of their income for retirement

The nation’s younger workers appear to be taking the message of saving for retirement to heart, research suggests.

Defined as workers ages 18 to 25, Gen Z is saving an average of 14% of their income for their golden years, according to a new study from BlackRock. Among millennials (ages 26-42), Gen Xers (ages 43-55), and baby boomers (ages 56-75), the average is 12%.

However, the overall share of workers of all ages who believe they are on track with their retirement savings has dropped from 68% to 63% in 2021, research shows. Retirement plan sponsors’ confidence has also declined, with 58% saying their employees are on the right track, compared to 63% last year.

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“Confidence in retirement is down for the first time in a few years,” said Anne Ackerley, head of BlackRock’s retirement group.

“Even in the pandemic it remained [the same]but we’ve seen it decline in every generation due to inflation and market volatility,” Ackerley said.

Confidence is highest among Gen Zers

However, broken down by generation, Gen Z members are most confident in their savings (69%), followed by boomers at 65%, and both millennials and Gen Xers at 60%.

Research for BlackRock’s “Read on Retirement” report includes input from 305 plan sponsors, 1,308 workplace savers, 1,300 independent savers and 300 retirees.

Why Americans find it harder to retire

Experts generally recommend that workers save at least 10% to 15% of income in a tax-advantaged retirement account. That would include a 401(k) or similar work plan, or individual retirement account.

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There are two things that could play into Gen Z’s higher savings rate, Ackerley said. For starters, they were more likely to be raised in households where no one had a traditional pension.

“I think it’s a reflection that we’ve switched to defined contribution plans from defined benefit plans,” Ackerley said.

“Generation Z was raised in households where there was a need to save for retirement … and the message is out there that you’re on your own, that you need to start saving early,” he said.

Another possible reason, Ackerley said, is that they may have seen family members struggle due to the Great Recession of 2007-2009, when job losses, foreclosures and investment losses were widespread, and want to avoid challenges. similar financial statements in the future.

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Young adults aspire to retire at age 63

Gen Zers also expect to retire at an average age of 63.6, the report shows.

That compares with working boomers, who peg that age at 65.9. Separately, a Gallup poll conducted last year showed that the average age retirees left the workforce was 62, while non-retirees said they plan to retire at 64.

It’s worth noting that if you use Social Security before your full retirement age (which is up to age 67, depending on when you were born), you’ll end up with permanently reduced benefits. If you wait past that full retirement mark, your benefits will continue to increase until you reach age 70.

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