Gen Z Super-Savers Prepare for Retirement
Young workers prioritize long-term financial security amid global uncertainty.
Gen Z demonstrates remarkable financial savvy, prioritizing retirement savings in response to economic instability and a constant stream of troubling news. But are they saving enough, and are employers doing enough to help them?
Early Retirement Contributions
Research indicates that Gen Z, born between 1997 and 2012, contributes to retirement plans at a rate exceeding previous generations. Their 401(k) assets are reportedly over three times greater than what Gen X households held at a similar age in 1989, accounting for inflation. A separate 2023 study by the TransAmerica Center for Retirement Studies supports this, noting Gen Z’s “remarkable job”
saving for retirement, with many allocating up to 20% of their income.
The oldest members of Gen Z likely recall the financial crisis of 2008-2010 and have navigated a global pandemic. The current generation is hyper-aware of political unrest, climate change, and violence through constant social media updates, motivating them to seek financial security.
Maximizing Savings Strategies
Employers can now offer Roth 401(k) plans and contribute to them, thanks to the Secure 2022 legislation. Contributions are made after taxes, grow tax-free, and can be withdrawn tax-free after age 59 1/2. This benefits younger, lower-earning employees who can invest at lower tax rates.
529 plans represent another valuable after-tax option, enabling employees to save for higher education, private school, or religious school. Gen Z members could use these plans to save for their children’s education.
Health Savings Accounts
Health Savings Accounts (HSAs) have gained popularity, allowing employees with high-deductible plans to set aside pre-tax money for unreimbursed medical expenses. Balances roll over, and some consider it a 401(k) for healthcare. These accounts enable younger workers to save for future healthcare costs without affecting retirement savings.
Student Loan Matching
With student loan repayments now required, younger individuals face the challenge of managing debt and saving for retirement. The Secure 2022 legislation allows employers to match student loan payments with 401(k) contributions, aiding employees in securing their future.
Financial Counseling
Navigating financial options can be overwhelming, especially for young adults. Employers should consider retaining a financial counselor to offer personalized advice. According to a recent survey, over half of Americans feel stressed about their finances (PwC 2023).
While a recent Goldman Sachs survey indicates that 60% of Gen Z respondents report “having a personalized financial plan, not just for retirement but also for goals like buying a home or a car”
and 68% “believe their savings are on-track or ahead of schedule”
, employers should provide more support to help them optimize their retirement savings strategies. This generation seems eager to embrace such assistance.
