Burdened by student debt, high costs of living and stagnant wages, many recent college graduates and young people consider themselves lucky to be able to afford the new iPhone, let alone saving for retirement (or a house). At least that's how the stereotype goes.
But people in their 20s and 30s are one of the first generations to see government and (sometimes) employer subsidized individual retirement savings options available throughout their work lives, and at least some of them are taking advantage of it.
Fidelity, which manages $1.25 trillion of retirement savings held in 401(k) plans, looked specifically at its customers aged 18 to 34 and found that about 20% of them save at least 15% of their income into a retirement plan. Fidelity calls that group, with about 421,000 members, the "Super Savers."
On average, they earn $73,000 a year and have about twice as much in their retirement accounts as the rest of the young population who save. The average 401(k) balance for young savers is $22,100, with those saving 15% and up having an average balance of $44,000.
Much of the participation among young people in 401(k) plans is due to two big innovations in retirement saving: auto-enrollment for employees, and the target-date fund, which adjusts an investor's mix of assets (usually bonds and equities) to get more conservative as they get closer to retirement. Fidelity's Freedom 2050 fund, designed for people retiring at age 65 around 2050, is currently over 93% invested in stock funds.
Among people born between 1981 and 1997, Meghan Murphy, Fidelity's director of workplace thought leadership, said, "62% are 100% invested in a target date fund, they're taking very good advantage of an investment option that's do-it-for-me." But the so-called Super Savers are more likely to pick and choose their investments. Those big savers have about 85% of their retirement assets in stocks, while savers the same age who use target date funds have 89% of their assets in stocks.
Murphy said about 17% of young people had 100% of their retirement savings in stocks, a risky position, but not all that far from standard recommendations. Meanwhile, some 4% have taken their retirement savings out of stocks entirely, a position that only makes sense if you think the apocalypse is imminent.
It isn't. And Murphy encourages young people to stick with their retirement funds for the long run, even if more tempting uses for the money pop up in the short term. "Although we anticipate many are facing financial priority decisions student loans and new bills, they've also prioritized saving for retirement," said said, "and that saving will benefit them for the end."