A Retirement Lesson from the Kids Out There

Last year didn’t fare well for most retirement savers.

The average workplace retirement account balance at Vanguard was $112,572 at the end of 2022, down 20% from the end of 2021, according to the asset manager’s latest How America Saves report. Fidelity saw similar declines, reporting in their 2022 retirement analysis that the average balance in its 401(k) plan tumbled 20.5%.

But there was good news for some retirement savers. Of all the demographics, Gen Z made major strides.

People in their 20s opened 71% more IRA accounts compared to the last quarter of 2021. Overall, Gen Z account balances were up 14% year-over-year, which makes them the only group that had positive growth.

As of the end of 2022, most Gen Z savers (84%) were investing their 401(k) savings in target date funds (TDFs). In the not-for-profit market, almost 70% of participants invested all of their assets in TDFs. Investing this way is a good strategy for those starting out. If you don’t have a ton of investing expertise, the funds give you portfolio management at a fairly low cost.

For more on 2022 retirement account balances, read Adam Hardy’s story.

— Jill Cornfield, deputy editor

So close, but still not there. After planning and saving for decades, a quarter of pre-retiree investors (ages 55 to 65) say they are delaying plans to stop working because of inflation, high interest rates and an unstable economy, according to the Nationwide Retirement Institute’s annual Advisor Authority survey. Even more troubling: Another 15% are unsure if they will ever retire.

• The Retirement Answer Man has some info about Roth conversions for a listener concerned that tax brackets might rise in 2025 (podcast).
• You’re really never too young to save for retirement. Remember — compounding is your strongest ally.
• Saving for retirement can be tough. These rules are easy.

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