It’d be easy to forgive most people for changing or even abandoning their financial or investing strategy over the past few years. With the pandemic, inflation, ongoing prospects of a recession, and rising interest rates, there’s been a lot of economic action packed into a relatively short period of time.

And evidently, investors have changed things up to a degree, and that includes young investors, according to a survey released this week by fintech company Betterment.

One particularly noteworthy finding in the wide-ranging survey is that while a majority (63%) of investors have not changed their strategy as it relates to planning or saving for retirement, of those who did, more than a quarter withdrew money from their retirement accounts, such as an IRA or 401(k)—something many financial experts caution against for a variety of reasons.

Further, the survey finds that more Gen Z (30%) and millennial (27%) investors withdrew money from their retirement than Gen X investors (16%). Baby boomers were the most likely to withdraw (40%), although that finding was not as unexpected, the report notes.

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All told, this could be a worrisome trend: Advisors tend to recommend that younger investors save as often and early as they can to allow for compounding and the tendency of the market to rise over time to work its magic. If young investors are dipping into those accounts, rather than leaving them be, it could hamstring future returns and reduce their overall investments due to any applicable early-withdrawal penalties (generally 10%, depending on the account type).

It could also be a sign that younger investors are in a more precarious financial position, given that many of them are using their retirement accounts as emergency funds. While it makes sense that younger investors would be worse off financially than older ones, Betterment’s team offers up a few possible explanations for the trend.

“While we’ve seen a number of encouraging metrics, like a high percentage of investors building an emergency fund, it’s concerning to see some young investors dipping into their retirement funds,” said Kristen Carlisle, Betterment at Work’s general manager, in a comment included with the survey.

“This trend among younger generations may indicate that these investors lack stability in retirement planning (versus their predecessors) or don’t fully understand the penalties for withdrawing early. We recommend that younger investors avoid dipping into their retirement funds whenever possible, and prioritize building up emergency funds so that they have other resources to tap into.”

And now for the good news

Despite the potential inference that younger investors may be in dire financial straits—since many are raiding their retirement accounts—there were also some good indications.

The survey also finds that 59% of respondents overall had a positive or very positive outlook in regard to their personal financial concerns for the remainder of the year. And across generations, the number of people with an emergency savings fund is up, too—78% in 2023, per the survey, up from 59% in 2022.

That may be a silver lining and hopefully an indication that young investors are padding their savings accounts in an initial step toward taking a hands-off approach to their retirement accounts.

“It's encouraging after a period of uncertainty to see a rise in optimism and a steady focus on long-term financial planning,” said Mike Reust, Betterment’s president, in a statement.


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