Gen Z Feels on Track for Retirement

By: Kaydee Ambas · January 24, 2023 · Reading Time: 3 minutes

Confidence Boost

Financial advisors across the country can rest assured knowing that Gen Z has been listening to their seminars. Despite comprising the youngest segment of the workforce, the TikTok generation still socks away the largest percentage of their income for retirement: 14%, compared to an average of 12% among millennials, Gen X, and baby boomers.

Additionally, Gen Z feels the best about doing so, with 69% reportedly feeling confident that they’re saving enough to eventually retire in comfort.

Confidence Killers

Despite Gen Z’s upbeat sentiment, retirement confidence on the whole is down across the country. The share of workers who felt that they were on track for retirement fell from 68% to 63% in 2021.

The two main culprits for this increased lack of faith are inflation and market volatility. 2022 closed out at an annual inflation rate of 6.5%, which led to price hikes for everyday goods like groceries and gas. This left Americans with less cash to save for retirement.

On top of that, the stock market had one of its worst years ever, with the S&P 500 (SPY) dropping nearly 20%. If your retirement account had $100,000 going into 2022, you’re likely starting 2023 with closer to $80,000.

Confidence Restored

If 2022 has you feeling nervous about your nest egg, don’t worry. Here are some things to keep in mind to restore your confidence.

When investors try to time the market by selling on the dip and buying on the rise, they actually lose out. Selling at the low point means an investor essentially “locks in” their losses instead of letting them potentially rise over the long term.

Keeping money in the market for a long period of time can help cut the risk of short-term dips or declines in stock pricing. Staying put despite periods of volatility, for some investors, could be a sound strategy.

Remember that the stock market typically averages a return of 10% annually, with years like 2022 being a statistical outlier. If you still have a few years left before retirement, continue contributing to your IRA or 401(k) as normal. In fact, some argue it might be a good time to over-contribute, to take advantage of the down market.

An investor’s time horizon may play a significant role in determining whether or not they might want to get out of the stock market. Generally, the longer a period of time an investor has to ride out the market, the less they may want to fret about their portfolio during upheaval

If your confidence in your retirement savings has been shaken, rest assured. Financially, 2022 was a tough year for everyone. With any luck, 2023 will be the year where things turn around.

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