Retirement savers have plenty rules of thumb to help them prepare for their golden years. For example, Empower recommends individuals save 10% to 15% of their salary (including employer contributions) for retirement. The reality is that individuals may need to save more or less than this depending on their goals and their current financial situation. One-size-fits-all recommendations are helpful starting points, but personalized planning is what’s needed.

Here are five habits that excellent retirement savers and investors follow.

#1 The power of compounding

Retirement may be far off for many, but the sooner an individual starts thinking about it the better. It will help them manage their daily financial situation, and with a longer savings horizon, investments have potentially more time to grow. It’s all about the power of compounding.

With that in mind, successful retirement savers ideally start saving upon entering the workforce or at the earliest possible time. Today’s youngest generation – Gen Z – represents approximately 10% of active participants in defined contribution (DC) retirement plans and that 10% have an average savings rate of 5.9%.¹

Savings regret is common: More than half (61%) of workplace savers wish they had started saving for retirement earlier, and only 11% of Americans with an employer defined contribution plan feel they are saving enough for retirement.¹

Corporate DC savings rates by generation

#2 Workplace savings

Excellent retirement savers take full advantage of their employer retirement plan’s matching contributions or health savings account’s (HSA) matching contributions when available. Most employers that offer a 401(k) retirement plan to their employees (>80%) also match employee contributions.² It’s important to understand how matching contributions work – employers can set them up in different ways. For example, some may offer dollar-for-dollar matching contributions up to a certain amount while others may match 50% of employee contributions up to a maximum amount. The goal is for employees to maximize the full employer match and not leave money on the table.

Seventy five percent of corporate DC participants are maximizing their employer matching contributions, but that drops to 64% for Gen Zers.¹

#3 The power of advice

Advice can make a big difference helping individuals prepare for retirement. A recent Empower analysis of corporate DC workplace savers shows that individuals who have an advice consultation with an Empower registered representative through their DC plans may be significantly better prepared for retirement than those who haven’t.³

Key workplace saver retirement metrics by advice criteria

Source: Empower analysis of 7.8 million corporate DC participants as of December 31, 2023.

#4 Diversify savings

Diversifying a retirement account’s investments helps reduce risk from concentrations in particular sectors, asset classes, or individual securities. This is especially important during periods of heightened volatility. Workplace savers can diversify their portfolios through the use of professionally managed strategies (managed accounts or target date funds).

More than two-thirds of DC workplace savers are using professionally managed strategies; however, professionally managed strategy usage is lowest among baby boomers (56%).¹

Investment strategies of workplace savers by generation

#5 Take a holistic financial view and avoid withdrawals

One of the keys to saving more? Have a complete dashboard of your accounts. Workplace savers who have linked three or more financial accounts to create a holistic financial picture save 30% more than those who haven’t linked accounts.¹

Avoiding early withdrawals from workplace retirement accounts is also critical to maximizing the long-term growth potential of retirement plan assets. Only 15% of active DC workplace savers have an outstanding loan from their DC retirement plan, with Gen Xers accounting for more than half of those outstanding loans.¹

These five steps can help individuals pursue their retirement goals and possibly become the next retirement millionaire. Ultimately, excellent retirement savers follow a disciplined approach to retirement savings that puts them in a strong position to achieve the financial freedom they strive for.