Research suggests that the nation’s youngest workers are taking the rescue-for-retirement message to heart.
Defined as workers aged 18-25, Generation Z are saving an average of 14% of their income for their golden years, according to a new BlackRock study. Among millennials (26-42 years old), Gen Xers (43-55 years old) and baby boomers (56-75 years old), the average is 12%.
However, the overall share of workers of all ages who think they are on track with their retirement savings has dropped to 63% from 68% in 2021, the research shows. The confidence of pension plan sponsors is also waning: 58% say their employees are on the right track, up from 63% last year.
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“Confidence in retirement has declined for the first time in a few years,” said Anne Ackerley, head of BlackRock’s retirement group.
“Even during the pandemic he remained [the same]but we have seen it decline across generations due to inflation and market volatility, ”Ackerley said.
Confidence is highest among Gen Zs
Broken down by generation, however, Generation Z members are more confident in their savings (69%), followed by boomers at 65% and both millennials and Generation X members 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 income in a tax-subsidized retirement account. This would include a 401 (k) or similar work plan or an individual retirement account.
There are two things that could affect Gen Z’s higher savings rate, Ackerley said. For starters, they were more likely to have grown up in families where no one was counting on a traditional pension.
“I think it’s a reflection of the fact that we have switched to defined contribution plans from defined benefit plans,” Ackerley said.
“Gen Z grew up in families where there was a need to save for retirement … and the message is out there that you are 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, home foreclosures and investment losses were rife – and wanting to avoid similar financial challenges along the way.
Young adults are aiming for retirement at the age of 63
Generation Z also plans to retire at an average age of 63.6, the report shows.
This is comparable to working boomers, who set that age at 65.9. Separately, a Gallup poll conducted last year showed that the average age of retirees who left the workforce was 62, while non-retirees said they intend to retire at the age of 64.
It’s worth noting that if you tap Social Security before full retirement age (which goes up to 67, depending on when you were born), you’ll end up with permanently reduced benefits. If you wait beyond the full retirement limit, your benefits will continue to grow until you reach 70 years of age.