Gen Z Is Getting a Leg Up on Their Retirement Savings

While Gen Z might not be facing the best financial odds, the youngest generation does appear to be getting a leg up on their retirement savings, according to a new report.
With Social Security likely to become insolvent by the mid-2030s and typical payments too low to support Americans for all of their retirement expenses, many Americans will lean on employer-offered plans like IRAs and 401(k)s.
But not all generations have been using these retirement tools at the same level.
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In a new Payroll Integrations report, Gen Z was found to participate the least in their retirement benefits. However, those who did contributed more than any other generation.
The study found that only 36 percent of Gen Z workers, which include those aged 18 to 26, invested in a retirement plan. That was compared to 71 percent of millennials, 74 percent of Gen X and 59 percent of baby boomers.
Typically, fewer young Americans invest in their retirement because they’ve just started in their careers and may not have a high enough salary to devote some of it to retirement savings. Or they might not yet be educated on the benefits.
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However, the Gen Zers who are investing appear to be ahead of the game. More than half of Gen Zers with a retirement plan were contributing 11 percent or more of their salary. Comparatively, only 37, 41 and 32 percent of millennials, Gen X and baby boomers, respectively, were doing the same.
“It’s not that Gen Z doesn’t care about their future, it’s that the deck is stacked against them,” HR consultant Bryan Driscoll told Newsweek. “They’re hustling to stay afloat in an economic system that favors the wealthy. For those with a bit of disposable income, they’re likely hyper-aware of the need to secure their future, knowing they can’t count on social safety nets.”
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The report was based on responses from 250 full-time employees and HR leaders between the ages of 18 and 65.
Gen Z has entered the workforce during a unique time. As the majority started working during or after the COVID-19 pandemic, they’ve had to build their careers during the age of remote work, facing fewer benefits, higher costs and often lower wages amid inflation, experts said.
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, said the findings were both a positive and negative sign, depending on which percentage of Gen Z you’re looking at.
“Despite all the additional financial literacy we have available through different virtual and in-person means, we’re still seeing a low penetration rate of retirement products for Gen Z,” Beene told Newsweek. “It’s true they are early in their careers, but at the same point, there’s been such a push in recent years to get younger workers saving and investing at an earlier age. It’s disappointing to see such a small portion of Gen Z are actually doing such.”
Still, those in Gen Z that are more financially savvy are doing themselves a world of favors when it comes to their retirement, the statistics show.
“It’s an encouraging sign to see that even if the overall percentage of Gen Z saving for retirement is low, those that are take advantage of these benefits to a greater extent than prior generations,” Beene said.
Gen Z has tended to participate in retirement benefits at low levels for several reasons, Driscoll said. Small employers often don’t provide retirement plans, or if they do, employees can’t afford to contribute, he said.
“We’re living in a country where individual responsibility is cherished, regardless of the lack of opportunity for so many,” Driscoll said. “With wages stagnating and the cost of living skyrocketing, most Gen Z workers are barely keeping their head above water, so retirement contributions just aren’t a priority.”