Why This Type of 401(k) Owner Lost the Least Amount of Money Last Year

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  • The average retirement account shrunk 23% in 2022. Meanwhile, Gen Z balances grew by a healthy 14%.
  • Gen Z investors are just getting started, and poised to build strong portfolios.
  • Commitment to a long game is a good strategy for any investor.

In 2022, the average retirement account shrunk by 23%. And yet, according to data from Fidelity Investments, Generation Z balances grew by 14%. While boomers and millennials were getting walloped, investors born between 1997 and 2012 were sailing along.

Let's take a look at why that might be the case.

How it was done

On its podcast, Your Money Briefing, The Wall Street Journal spoke with financial reporting fellow Oyin Adedoyin to learn more. According to Adedoyin, Gen Z's good fortune had nothing to do with investment savvy or even with beginner's luck. It all came down to Gen Zers having less invested in the markets.

The average Gen Zer had an investment balance of around $6,000, compared to the average of $103,900 in all Fidelity retirement accounts. With less money invested, there was less damage that could be done.

The flip side of that coin

Lest anyone is tempted to believe that Gen Z's 2022 experience illustrates the value of not investing, let's look at two different scenarios. The first is a Gen Zer born in 2004, who puts the same amount into a 401(k) for 30 years. The second was also born in 2004 but thinks they're playing it safe by not investing in a retirement account.

The average nominal return for the S&P 500 index over the past 30 years is 10%. For the sake of this illustration, we'll say that Gen Zer No. 1 sees a more modest return of 7%.

  • Gen Z No. 1 invests $500 per month in their retirement account, never increasing the contribution. At the end of 30 years, their account is worth $566,765.
  • Gen Z No. 2 decides the best move is to move their money to a high-yield savings account, paying a decent rate of 4%. Even if that rate remains stable for 30 years (it won't), Gen Z No. 2 will end up with $336,510. That amount is certainly nothing to sneeze at, but it is $230,255 less than Gen Z No. 1 earned by investing.


As tough as 2022 was, Adedoyin says that Americans do not appear deterred. That may be because experienced investors understand that, historically, stocks lose on average 35% during bear markets. However, during bull markets, stocks gain an average of 114%.

Just as importantly, bear markets last an average of 292 days, while bull markets last an average of 992 days. Simply put, stocks have increased in value far more often than they've lost value.

2022 was a bad year for investors, but it wasn't anything out of the ordinary in terms of historical performance.

Does this mean Gen Z is not interested in investing?

The fact that the average investment account balance for Gen Zers was $6,000 last year doesn't mean they're sitting out the opportunity to allow their money to grow.

According to Adedoyin, his reporting finds that Gen Z has a real commitment to investing, aided by a greater access to internet research than previous generations had.

Target-date funds

One reason that Gen Z had less invested in retirement last year is that they're just getting started. A whopping 84% of Gen Z investors keep most of their investments in target-date funds. A target-date fund is a portfolio that shifts from stocks (considered more volatile but also more profitable) to bonds (considered stable but offer a lower return) as people age.

A target-date fund allows a Gen Z investor to invest more gradually over time. Many increase their savings rate by 1% per year until they hit 10% or more of their annual income.

It's a matter of "set it and forget it," as many Gen Z workers are not fully aware of how much they have in their 401(k) accounts. They are automatically enrolled in the system and make regular pre-tax contributions. The goal is to leave it alone and let it grow.

Perhaps that's the best advice for any of us as we invest in our own futures. Don't sweat the ups and downs when there is a long game to be played.

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