Retirement savings is evolving, and this past year has brought new challenges—and opportunities—for 401(k) investors of all ages. Whether you’re a Gen Z newcomer just starting to save or a Baby Boomer nearing retirement, there are valuable lessons to glean from this year’s trends. The best part? These insights can help you grow your nest egg, weather market changes, and align your strategy with your personal goals. Let’s break it down.
Resilience Wins: What Market Volatility Taught Us
This year has been a wild ride in the financial markets, with inflation concerns, rising interest rates, and economic uncertainty shaking up portfolios. For investors, one lesson stands out: don’t panic.
Take, for example, the resilience of target-date funds. These funds automatically adjust your portfolio’s risk level based on your retirement timeline. This year, they’ve proven their worth by balancing growth and stability, especially for younger investors like Millennials and Gen Z. If you’ve stayed invested instead of pulling out during market dips, you’ve likely benefited from the eventual recoveries.
Pro Tip:
- Younger Investors (20s-30s): Use volatility to your advantage by continuing to invest consistently. This year highlighted the power of dollar-cost averaging, where investing the same amount regularly allows you to buy more shares during market dips.
- Older Investors (50s-60s): Ensure your portfolio is well-balanced as you approach retirement. Minimizing risk becomes increasingly important during this stage. If you haven’t reviewed your allocations recently, now is the perfect time. Make use of the Investment Risk Tolerance tool to assess your comfort with risk. For more insights on risk and its relationship with diversification, check out the Slavic401k blog.
Personalization is No Longer a Luxury—It’s a Must
We have seen a surge in personalized 401(k) strategies. From robo-advisors that tailor investment advice to apps that let you track your savings goals in real time, investors are demanding more control and customization than ever.
For instance, some providers now offer self-directed 401(k) portfolios, allowing seasoned investors to choose individual stocks or ETFs beyond the default plan options. Meanwhile, financial wellness calculators are helping younger savers set realistic retirement goals based on their lifestyle.
Example:
A 30-year-old investor aiming for early retirement could achieve this goal by increasing their contributions by just 1%. This small adjustment could significantly reduce the number of years they need to work. Meanwhile, a 55-year-old could use the same tools to see if they’re on track for a comfortable retirement—or if it’s time to catch up on contributions.
Pro Tip:
- Explore what your plan offers. Many 401(k) providers now include these tech-forward tools at no additional cost.
- Make it personal. Take advantage of financial literacy resources, webinars, or one-on-one sessions to better understand your plan options.
Catch-Up Contributions: A Boomer’s Best Friend
One of the most impactful changes this year came with expanded opportunities for catch-up contributions. Workers aged 50 and older can contribute even more to their 401(k) plans. For Baby Boomers looking to boost their retirement savings, this is a golden opportunity.
Example:
Imagine you’re 55 and have been diligently contributing to your 401(k). Now, with the new rules, you can add even more through catch-up contributions, significantly increasing your nest egg. This extra boost can make a substantial difference in your financial security over the next decade.
Pro Tip:
- If you’re over 50, prioritize maxing out contributions. It’s one of the easiest ways to supercharge your retirement savings without drastically altering your lifestyle.
Gen Z is Changing the Game—And Everyone Can Learn From Them
Gen Z workers are rewriting the rules of retirement planning, and older generations would do well to take note. Close to one out of two Gen Z’s (46%) said they were willing to take “substantial” or “above-average” financial risks due to their confidence in their ability to make investment decisions. Gen Z investors have a longer time horizon due to their age, so they can take more risks and tolerate losses compared to older investors. This group is saving earlier, embracing digital tools, and prioritizing financial literacy.
Example:
A 24-year-old with a starting salary of $50,000 might contribute just 5% to their 401(k). With a typical employer match, they’re setting themselves up for decades of compound growth. If they increase their contributions by 1% each year, they could retire with over $1 million—without feeling the pinch along the way.
Pro Tip:
- Millennials and Gen X, start thinking like Gen Z. Automate your contributions and educate yourself on your options. It’s never too late to adopt good habits.
Plan, Adapt, Succeed
This past year has shown us that 401(k) success isn’t just about saving—it’s about smart saving. From market resilience to personalized strategies, ESG investing to catch-up contributions, there’s something for everyone to take away from recent market trends.
No matter your age, the key is to stay informed, use the tools at your disposal, and adapt your strategy as needed. After all, the best time to improve your 401(k) plan was yesterday—the second-best time is today.
