While Americans on average begin their retirement savings journeys in their late 20s, research from Voya Financial finds close to three-quarters wish they had started saving sooner.
New findings from a Voya consumer survey find that more than half of Americans started saving for retirement between 18 to 34 years old, with the average starting at age 28. However, 64% of respondents say they wish they commenced savings before they turned 25, with the average wishing they started saving at 23 years old.
“Deciding to save early and often in an employer-sponsored 401(k) or other retirement account is within the control of every employee who has access — and this can be an important factor in creating an effective plan that leads to financial security in the future,” said Kerry Sette, vice president of Consumer Insights & Research at Voya Financial. “As many employees face competing financial priorities, it’s important to remember that saving in a tax-advantaged retirement account can allow earnings to compound over time, which could be increasingly powerful for employees with a longer investment time horizon.”
Already outpacing other age groups, Gen Zers are the earliest to begin saving for retirement, with the average starting at around 20 years old. This could likely stem from the fact that a growing number of young savers have access to defined contribution (DC) plans compared to their older counterparts, and are likelier to take advantage of the tax incentives associated with their 401(k) plans, notes past research from the Investment Company Institute (ICI).
Millennials were slightly off in beginning their savings journey, with the average starting at 24 but wishing they had initiated savings a year earlier at 23. Gen Xers began saving at 30 despite wishing they had begun at 23, while Baby Boomers had the largest gap out of all generations—starting their savings at 32 yet wishing they had taken action at 23.
Widespread adoption of automatic enrollment plans, and its eventual popularity has also served a catalyst in encouraging participation. While automatic features have become a sort of standard practice in DC plans, it’s growth may be further exemplified as more state and local governments adopt the feature within their defined contribution plans, finds a 2023 report from MissionSquare Research.
“This recent Voya data highlights how the design of a workplace retirement plan can help encourage employees of all ages to maximize the benefits of employer-sponsored retirement accounts — as soon as possible,” said Tom Armstrong, vice president of Customer Analytics & Insight at Voya Financial. “For employers, plan design features such as automatic enrollment, automatic escalation and matching contributions can play a critical role in saving sooner.”