A growing divergence in retirement savings strategies is emerging across generations, with younger workers increasingly favoring alternative investment vehicles over traditional 401(k) plans. Data shows distinct patterns in asset allocation that reflect differing financial priorities and risk appetites.
- 47% of workers aged 25–40 allocate over 60% of retirement savings to IRAs, up from 32% in 2019
- Gen Z savers hold an average of $18,000 in taxable investment accounts
- 58% of Generation X savings are in 401(k) plans, with 38% also contributing to Roth IRAs
- Boomers have 71% of retirement assets in 401(k)s and IRAs, with 22% investing in real estate or annuities
- Robo-advisory and IRA service providers saw a 41% rise in new clients from 2022 to 2025
- 401(k) plan enrollment grew by only 1.3% in 2025, signaling stagnation in employer-sponsored savings
Millennials and Generation Z are increasingly redirecting retirement savings away from employer-sponsored 401(k) plans, opting instead for individual retirement accounts (IRAs) and taxable investment accounts. Among workers aged 25 to 40, 47% now allocate more than 60% of their retirement contributions to IRAs, compared to 32% in 2019. This shift is driven by greater access to low-cost index funds and a preference for investment flexibility. In contrast, Generation X (ages 41 to 56) continues to rely heavily on 401(k)s, with 58% of their retirement assets held in these plans. However, 38% of this group also maintains a Roth IRA, indicating a strategic hedging approach. Baby Boomers (ages 57 to 75) remain the most conservative, with 71% of their retirement savings in 401(k)s and IRAs, though 22% have begun investing in real estate and annuities to generate passive income. The data reveals a significant trend toward self-directed investing, particularly among younger cohorts. Among Gen Z savers, 55% use brokerage platforms like Fidelity, Charles Schwab, or Robinhood to manage retirement portfolios, with an average of $18,000 in taxable accounts per individual. This contrasts with Boomers, whose average taxable account balance is $42,000—higher in total but lower in proportion to overall retirement assets. The shift has implications for financial institutions and plan providers. Firms managing IRAs and robo-advisory services report a 41% increase in new client acquisitions between 2022 and 2025, while 401(k) plan enrollment growth has stalled, with only a 1.3% year-over-year increase in 2025. Employers are responding by enhancing matching contributions and offering educational resources to retain younger talent.