According to research, the country’s youngest workers seem to be taking the retirement savings message to heart.
Defined as workers aged 18-25, Gen Z saves an average of 14% of their income for their golden years, according to a new study by BlackRock. Among Millennials (26-42), Gen X (43-55) and Baby Boomers (56-75), the average is 12%.
However, the overall share of workers of all ages who believe they are on the right track with their retirement savings has fallen to 63% from 68% in 2021, according to the research. Pension plan sponsor confidence is also down: 58% say their employees are on track, down from 63% last year.
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“Retiree confidence is down for the first time in years,” said Anne Ackerley, head of BlackRock’s retirement group.
“Even during the pandemic, he remained [the same]but we’ve seen it decline across all generations due to inflation and market volatility,” Ackerley said.
Confidence is highest among Gen Zers
Split by generation, however, Gen Zs are the most confident in their savings (69%), followed by baby boomers at 65%, and millennials and Gen Xers at 60%.
Research for BlackRock’s “Read on Retirement” report includes contributions from 305 plan sponsors, 1,308 workplace savers, 1,300 independent savers and 300 retirees.
Experts generally recommend that workers save at least between 10% and 15% of their income into a tax-advantaged retirement account. This would include a 401(k) or a similar work plan, or a individual retirement account.
There are two things that could factor into Gen Z’s higher savings rate, Ackerley said. For starters, they were more likely to be raised in households where no one relied on a traditional pension.
“I think it’s a reflection of the fact that we’ve moved to defined contribution plans from defined benefit plans,” Ackerley said.
“Gen Z was raised in homes where saving for retirement was necessary…and the message is there that you’re on your own, that you need to start saving early,” she said.
Another possible reason, Ackerley said, is that they may have seen family members struggling due to the Great Recession of 2007-2009 – when job losses, home foreclosures and losses investment schemes were widespread – and they want to avoid similar financial challenges down the road.
Young adults aim to retire at 63
Gen Z also plans to retire at an average age of 63.6, according to the report.
This compares to working baby boomers, who set this age at 65.9. Separately, a Gallup survey last year showed that the average age of retirees leaving the workforce was 62, while non-retirees said they planned to retire at 64.
Note that if you press Social Security before full retirement age (up to age 67, depending on your date of birth), you will end up with permanently reduced benefits. If you wait beyond this full retirement, your benefits will continue to increase until you reach age 70.