Fidelity: Gen Z Savers Pour Into IRAs

For all age groups, however, average 401(k) balances were down 23% in 2022 due to declines in both stocks and bonds.


Generation Z retirement savers are piling into individual retirement accounts, according to the latest data from retirement plan participants in Fidelity Investments accounts.

Fidelity’s Q4 analysis of savings behaviors and account balances for 43.4 million 401(k), 403(b) and IRA, accounts shows that the average balance for Gen Z savers (born 1997-2012) increased 23% quarter-to-quarter, the highest of any other group.

In addition, Fidelity saw from Gen Z a 71% increase in IRA accounts opened compared to Q4 2021. That growth figure is large as it’s in part from more Gen Zers entering the work force, but it’s also a new environment in terms of financial awareness, says Rita Assaf, vice president of retirement and college products for Fidelity.

“Just because they are eligible and interested does not mean they have to open up a Roth IRA,” Assaf says. “Interest by younger groups [in IRA savings] has been happening for the last couple of years because of the environment; this crowd, or segments of it have had access to workplace plans at much younger ages than other generations, and there has been a lot done by workplaces to provide education and overall financial wellness awareness.”

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While Gen Z savers were a bright spot in 2022, 401(k) balances among Fidelity’s sample set fell 23% in 2022 to an average of $103,900. That tracks with Fidelity data PLANSPONSOR reported in November of last year showing average 401(k) balances were down 23% through Q3 due in part to the drop in both stock and bond values.

Young and Wild (About Finance)

Assaf says the proliferation of financial advice and discussion on social media is also likely contributing to Gen Z getting out of the gates strong with saving habits.

“You’re seeing so much more on social media of discussions of financial topics,” she says. “They are saying ‘I’m more interested in my financial well-being.’”

In the past, setting up an IRA meant walking into a branch and working with someone, Assaf points out. Now, IRAs can be started over a phone-based app in a matter of minutes, and Gen Z savers are often favoring Roth IRAs in part due to more flexibility in accessing funds at relatively lower penalties. Fidelity has leaned into the new technology with a no-fee brokerage account for teens that it opened in 2021, as well as Fidelity Bloom, an app that allows users to keep separate accounts for spending and saving.

The competition is growing, however, with app-based IRAs drawing the attention of Silicon Valley. Robinhood Financial, which made its name for stock trading during the pandemic, announced an online IRA with a 1% match in December. A venture-backed startup, Lilly Funds, came out in November with an app-based IRA that rewards savers with cash back and shopping rewards, and just this week new app-based 401(k) Arnie is offering users issue-based investing options that can put money toward—or avoid—certain companies or sectors.

Retirement Accounts Up Despite Inflation, Volatility

When considering Fidelity’s full sample group of 43 million savers, account balances were up in Q4 and participants continued to defer into retirement plans despite higher costs due to inflation and market uncertainty. The average 401(k) account balance increased to $103,900 in Q4, up 7% from Q3 2022. It was, however, well below the average balance of $135,600 in Q4 2021, before the market declines of last year.

The average 403(b) account balance increased to $92,683, up 6% from last quarter, according to Fidelity, though below the $115,100 average of Q4 2021.

The total savings rate for the fourth quarter, which reflects a combination of employer and employee 401(k) contributions, was 13.7%, holding steady from 13.8% in Q3 2022 and 13.9% in Q2 2022. While pre-retirement Boomers saved at the highest levels (16.5%), Gen Z savers were fairly consistent at 10.2% (versus 10.3% last quarter), according to the data.

AON Boosts Staff to Further $1B Pooled Employer Plan

Aon continues pooled employer plan push, adding headcount to keep adding beyond over $1B in reported assets and commitments in its PEP.

Aon is bringing on more staff to push its pooled employer plan business beyond its over $1 billion in reported plan assets and commitments, a spokesperson confirmed.  

Aon earlier this month hired Chris Han to the newly created role, director of pooled employer plan 401(k) sales. The company also added two sales executives for pooled employer plans, Thomas Geraghty and Alexander Xie. Rick Jones, senior partner and head of PEPs at Aon, said in an email that the time is right for Aon to commit resources to build the PEP business and grow market share. 

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“We believe that PEPs are the next generation of retirement savings because they reduce work for employers, reduce risk for fiduciaries and reduce costs and improve results for employees,” Jones explains. “We are ready to target this multi-trillion-dollar market with a dedicated sales team that will give clients the clarity and confidence they need to make better decisions to protect and grow their business.”

Aon is building up its team even as competitors enter the market. On Thursday, Willis Towers Watson announced a new PEP that the firm said will build on its experience with pooled employer plans in the U.K.  In October, AON said it had accumulated $1 billion in plan assets and commitments for its PEPs, with benefits for more than 30,000 participants from 40 employers.

Pooled employer plans were established by the SECURE Act of 2019 and introduced to the market in 2021. The goal was to encourage employers that didn’t provide retirement plans to participants to offer one. PEPs allow unrelated employers to convene to participate in a single 401(k) defined contribution plan sponsored by a registered pooled plan provider. The SECURE Act 2.0, passed in December 2022, permits certain 403(b) plans to be operated as PEPs as well.

Geraghty is responsible for PEP sales coverage in the mid-Atlantic and southeast. He was previously a regional sales director, at Empower.

Xie is responsible for sales covering the West region, says the spokesperson. Xie has worked at Aon since 2010, as an actuary and retirement plan strategist, within the firm’s wealth solutions practice.

After passage of the SECURE Act of 2019, Xie helped design, build and launch the Aon PEP, adds the spokesperson. A final position on the Aon PEP team is yet to be filled, the spokesperson adds.

Geraghty and Xie both report to Jones, the spokesperson says.

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