Personal Finance

Gen Z is stashing away 14% of income for retirement — more than older generations, study shows

Key Points
  • The average retirement savings rate for older generations (millennials, Gen X and baby boomers) is 12% of income, compared with 14% among Gen Zers.
  • While overall confidence in being on track for retirement is down from a year ago due to inflation and market volatility, Gen Z has the highest share of savers who feel assured they're getting it right, at 69%.
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Young adults may be hearing the save-for-retirement drumbeat loud and clear, a new study suggests.

Generation Z workers — defined in the study as those ages 18 to 25 — are socking away, on average, 14% of income for their golden years, according to new research from BlackRock. That compares with 12% for their older counterparts: millennials (ages 26-42), Gen Xers (ages 43-55) and baby boomers (ages 56 to 75).

At the same time, the total share of Americans who think they are on track with their retirement savings has fallen to 63% from 68% in 2021, the research shows. Plan sponsors' confidence also is down: 58% say their employees are on the right path, compared with 63% last year.

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"Retirement confidence is down for the first time in a few years," said Anne Ackerley, head of BlackRock's retirement group.

"Even in the pandemic, it stayed [the same], but we've seen it come down across all generations due to inflation and market volatility," Ackerley said.

Broken down by generation, Gen Zers have the most confidence in their savings (69%), followed by boomers at 65%, and both millennials and Gen Xers at 60%.

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The research for BlackRock's "Read on Retirement" report includes input 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-advantaged retirement account. That would include a 401(k) or similar workplace plan, or an individual retirement account.

There are two things that might factor into Gen Z's higher rate of savings, Ackerley said. For starters, they were more likely to be raised in households where no one was counting on a traditional pension.

[T]he message is out there that you're on your own, that you need to start saving early.
Anne Ackerley
Head of BlackRock's retirement group

"I think it's a reflection that we've switched to defined contribution plans from defined benefit plans," Ackerley said.

"Gen Z was raised in households where there was a need to save for retirement … and the message is out 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 watched family members struggle due to the 2007-2009 Great Recession — when job losses, home foreclosures and investment losses were widespread — and want to avoid similar financial challenges down the road.

Gen Zers also envision retiring at an average age of 63.6, the report shows.

That compares to working boomers, who peg that age at 65.9. Separately, a Gallup survey done last year showed that among retirees, the average age they left the workforce was 62, while nonretirees said they plan to retire at age 64.

It's worth noting that if you tap Social Security before your full retirement age (which is up to age 67, depending on when you were born), you'll end up with permanently reduced benefits. If you wait beyond that full retirement mark, your benefits will keep growing up until you reach age 70.