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Gen Z Investors Pile Onto Fidelity’s Retirement Platform

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What You Need to Know

  • The average IRA balance rose to $135,700 from $134,900 last quarter, and 15% year over year.
  • Gen Z retirement savers with an IRA overwhelmingly use Roth IRAs for their savings — 95% of total contributions in Q3.
  • More than 85% of Gen Z workers have all their savings in a target date fund.

Fidelity Investments reported Thursday that account balances of the more than 30 million retirement savers on its platform tapered off in the third quarter, but average balances were still up by double-digit percentages from a year ago.

The average IRA balance rose to $135,700 from $134,900 last quarter and increased 15% year over year. The average balance of 401(k)s dipped to $126,100 from $129,300 in the second quarter, but increased 15% from a year ago. 

The average 403(b) account balance decreased from $113,300 to $110,800, still 13% higher than in the 2020 third quarter.

The analysis showed that the number of Gen Z investors across Fidelity’s retirement platform reached a record 1.4 million in the third quarter, nearly double the number one year ago. 

Gen Z retirement savers with an IRA overwhelmingly use Roth IRAs for their savings, with contributions to Roth IRAs making up 95% of total contributions in the third quarter. 

Among 401(k) and 403(b) plans, many Gen Z workers are automatically enrolled in their plan and are defaulted into a target date fund. As a result, 86% of Gen Z workers are holding 100% of their savings in a target date fund. 

Over the past two years, we are seeing the next generation of investors rise up and get more engaged with their finances, leading to more than 4.7 million new retail accounts on Fidelity’s platform, and it’s encouraging to see so many young people planning for their future,” Kelly Lannan, vice president for young investors at Fidelity Investments, said in a statement. 

“Gen Z and millennials may get an undeserved rap that they are mainly ‘living in the now’ but we know from our Fidelity Spire app users that retirement is the number one long-term goal they are trying to reach.” 

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According to the analysis, contributions to workplace retirement accounts reached record levels in the third quarter. The average 401(k) contribution rose to 9.4%, marking the fifth consecutive quarter the overall 401(k) contribution rate increased. 

In addition, total contributions to 403(b) accounts over the past 12 months reached a record $6,250, with more than 70% of 403(b) savers contributing to their account. 

Staying the Course

Fidelity’s third-quarter analysis found that, despite the stock market uncertainty in the July-to-September period and the continuing economic effects of the pandemic, only 5.1% of 401(k) savers made a change to the asset allocation. 

This was the lowest percentage since the 2019 third quarter. Among Gen Z workers, the percentage dropped to 2.4%. 

The percentage of workers with an outstanding loan from their 401(k) dropped to a record low 17.3% in the third quarter, down from 18.7% in last year’s third quarter. 

The percentage of workers with an outstanding 401(k) loan has dropped in seven of the last eight quarters, according to the analysis. 

Some 97% of 401(k) savers either maintained or increased their contribution rate in the third quarter. Among the slightly more than 8% of 401(k) savers who increased their contribution rate, the average contribution increase was 3.7%.