Millennials and Gen Z are getting serious about saving for retirement — and not just with their 401(k) plans.
New data released by Fidelity shows that the number of IRA accounts among Gen Z investors rose 83% between the third quarter of last year and the third quarter of 2022. The number of millennial IRA accounts rose 25%, while the number of IRA accounts among investors of all ages rose 11%.
An IRA, or individual retirement account, is a tax-advantaged way to save money for retirement. Many people use them in addition to an employer-sponsored retirement plan like a 401(k) or 403(b). With a traditional IRA, you invest pre-tax money that grows now, and your tax bill comes when you withdraw the funds in retirement. With a Roth IRA, you pay taxes upfront and your investments grow tax-free.
The growth in new IRA accounts over the past year happened despite the fact that average IRA balances decreased nearly 25% to $101,900, Fidelity found. Those losses aren't too surprising given how stocks have been performing: The S&P 500 index is down more 17.5% so far this year.
Savings rates for 401(k)s among all age groups held steady over the last year, and actually ticked up (from 10% to 10.3%) for members of Gen Z. Average 401(k) balances rose by 1.2% for Gen Z investors, too.
The data signals that younger generations are doing exactly what experts recommend by continuing to invest despite a challenging market.
“Retirement savers have wisely chosen to avoid the drama,” Kevin Barry, president of Workplace Investing at Fidelity Investments, said in a news release, referring to the big swings in the stock market over the past year.
“This is important,” he added, “because one of the most essential aspects of a sound retirement savings strategy is contributing enough consistently — in up markets, down markets, and sideways markets — to help reach your goals.”