401k Plan And Generation Z: On Retirement Investing

Generation Z, those born between 1997 and 2012, are not too young to start thinking about retirement, according to data from Fidelity Investments. The number of investors in this generation who have opened accounts with Fidelity has almost doubled in the last year.

At the same time, some retirees are continuing to invest, even though the market is volatile. The IRA balance is slightly higher, while the account balance between 401(k) and 403(b) programs has decreased moderately from the previous quarter. However, these investments are long-term, meaning that investors who are still decades away from retirement should avoid selling panic as the market moves.

Although the amount of money in each account has decreased, the average balance of all accounts has increased since this time last year. For example, in the third quarter, the median balance of IRA’s increased by 15% from 2020 to 2021. The 401 (k) balances followed a similar trend; it too went up 15%. Lastly, while 403 (b)’s had a smaller increase of 13%, all patterns point to an upwards shift compared to last year.

Even in the face of an epidemic, Americans have continued to save for retirement. In the third quarter, record levels of contributions were made to 401 (k) and 403 (b) programs – the average contribution rate for 401 (k) plans was 9.4 percent in the third quarter, marking the fifth consecutive quarterly rise in donation rates. More than 97 percent of 401 (k) account users maintained or increased their contributions in the third quarter.

Furthermore, few people have made any modifications to their 401 (k) investments in the wake of the most recent market volatility – something financial experts frequently discourage.

Gen Z investors tend to prefer Roth retirement accounts, which are funded by post-tax contributions (and thus more suitable for people who anticipate being in higher tax brackets when they retire). These new investors also frequently stick to their target-date funds, which are investment vehicles set aside specifically for a certain retirement year (like 2060, as an example). The majority of Gen Z employees were automatically enrolled in their 401(k) and 403(b) programs through work, and Fidelity’s research found that 86% of them held 100% of their money in the target date fund.

Target dates for retirement can help you plan your investments, but it’s important to remember that fees for these services are not always appropriate for everyone. Target date fees are a good starting point, but some investors may want to put more effort into their portfolios as they get closer to retirement age.

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Javier Niskanen is a crypto investor who is passionate about helping others achieve success. He has a background in computer science and has been involved in the crypto world since early 2017. Javier is excited to see how blockchain technology will change the world for the better.