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Generation Z’s retirement savings have increased more than any other generation in the past year, according to Fidelity Investments’ latest retirement analysis.
The average account balance of Gen Z with a 401(k) grew 34% between Q1 2022 and Q1 2023, according to a financial services firm. This is a higher rate of increase than millennials, generation X, and baby boomers.
Fidelity defines Gen Z as those born between 1997 and 2012. Gen Z have the lowest average 401(k) balances of all generations, which is not surprising given that they haven’t been in the workforce or contributing to retirement for a long time.
It should come as no surprise that their accounts are growing rapidly. Young people tend to have smaller balances, so their contributions tend to have a greater percentage impact on their savings.
According to Fidelity data provided to CNBC Make It, Gen Z has an average 401(k) balance of about $7,100, significantly higher than the median 401(k) balance for the same generation of $2,500. increase.
These numbers vary significantly as a small number of accounts with huge balances can raise the average. The median account balance is likely a more accurate representation of how much most people actually save for retirement.
This disparity is not unique to Generation Z. Her 401(k) overall average balance for Americans is $108,200, while the median is about $23,700.
Here’s how much Americans by generation saved on their 401(k), according to Fidelity.
Comparing your current savings to the total amount you want to save for retirement can be intimidating, so keep another number in mind: your savings rate. According to Fidelity, this is the percentage of pre-tax income that can be used for retirement savings.
Financial services companies recommend a savings rate of at least 15% (including both your own and your employer’s contributions if possible) if you want to maintain your desired lifestyle after retirement.
If you haven’t gotten there yet, don’t panic. Fidelity reports that Gen Z’s average savings rate is about 10.5%, up slightly from the previous quarter. The average percentage of millennials born between 1981 and 1996 is about 12.9%.
You can start with an amount you can afford and gradually increase your contribution over time. Fidelity recommends a 1% annual retirement increase, and many 401(k) plans allow you to set it as an automatic annual increase.
It may seem small now, but that steady increase could make a big difference in total savings 20 or 30 years from now.
Ann Dowd, Fidelity vice president, wrote in a March Fidelity Perspective article that “retirement savings may seem like a steep climb, but it doesn’t have to be as steep as it seems. ‘ said. “A small step now can turn into a big progress later.”
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