Fidelity published the Q2 edition of its Building Financial Futures report. <\/p>\n
It found that millennials are nearing the $100K savings milestone. <\/p>\n
It also showed Gen Z and millennials could be missing full employer 401(k) matches. <\/p>\n
There’s plenty of data showing younger people have a tougher time financially today<\/a> than previous generations. <\/p>\n It’s harder to buy a home. Student loan balances<\/a> can be astronomical. Wage growth hasn’t kept up with corporate profit growth. Inflation has eaten away at spending power. <\/p>\n But how are younger people doing with retirement savings? <\/p>\n Fidelity recently published the second-quarter edition of its Building Financial Futures report, offering a window into the investing patterns of savings behaviors of its clients. <\/p>\n The report is stacked with data, but we’ve pored over it and pulled out four interesting takeaways about how Generation Z and millennial savers are socking away money for their post-working years. <\/p>\n Millennial savers are approaching an important savings milestone <\/p>\n Millennials have an average of $94,300 in retirement accounts, according to the report, approaching a crucial retirement savings milestone: the $100,000 mark. <\/p>\n They’re nearly done with what investing legend and Warren Buffett’s right-hard man said was the hardest part about investing. <\/p>\n “The hard part of the process for most people is the first $100,000,” Charlie Munger said at Berkshire Hathaway’s 1999 shareholder meeting<\/a>. “If you have a standing start at zero, getting together $100,000 is a long struggle for most people.” <\/p>\n His comment piggybacked off of the point Buffett had made moments before: building wealth successfully is helped by starting early so that compound interest can start to grow your wealth for you. <\/p>\n While $100,000 is an arbitrary amount, the higher your portfolio value goes, the more noticeable the impact of compounding becomes. <\/p>\n The report found Gen Z’s average balance is $20,800. <\/p>\n Younger people are seeing lower employer contributions <\/p>\n Gen Z and millennials have lower employer contribution rates in their retirement accounts than older generations. <\/p>\n Here are the numbers: <\/p>\n This indicates that Gen Z and millennials may be leaving money on the table, and not taking their full employer match by setting their savings rate to be lower per paycheck. <\/p>\n Gen Z loves target date funds <\/p>\n Target date funds<\/a> are most popular with younger people, with 80% of Gen Z with all of their money in a target-date fund, compared to 46% of boomers. Target date funds automatically adjust your exposure to stocks and bonds as you get closer to retirement. <\/p>\n That’s likely due to a couple of factors. One is that target dates came to be in the 1990s, and have steadily grown in popularity since then, meaning boomers and Gen X likely weren’t as exposed to them when they started saving. <\/p>\n Second, target date funds are now the default option for many employer-offered retirement accounts. So, if an investor doesn’t have an idea for where else to put the money and doesn’t want to actively manage their account, a target date fund can make sense. <\/p>\n Gen Z savers are upping their savings rates most aggressively <\/p>\n One encouraging stat from the report is that Gen Z is the generation most aggressively increasing its savings rate. <\/p>\n This probably ties in with younger people generally having a lower savings rate to begin with, leaving more room for upside. <\/p>\n But it could also be due to a new law change. Last year, the SECURE 2.0 Act made auto increases in retirement savings rates mandatory for many new 401(k) accounts<\/a> created after December 28, 2022. The increases continue until savings rates hit a range of 10-15%, though employers can adjust these rates at any time. <\/p>\n