A new survey from a technology-led 401k provider Betterment for Business found that Millennials and Gen Z understand the value of building a retirement fund, but face conflicting financial concerns that prevent them from adequately preparing for retirement.
The new report, “Employee Retirement Preparedness: Millennials and Gen Z,” polled around 1,000 U.S. Millennials and Gen Zers to better understand their priorities and how employers and financial advisors can best serve their needs.
Millennials and Gen Z are rapidly taking over the labor pool, projected to comprise 50% of the global workforce by 2020. Amidst rising student debt, the decline of pensions and uncertainty around the future of Social Security, these generations face a new retirement reality.
Workers have become increasingly responsible for funding their own retirement, but confusing financial advice and subpar plans have left many unprepared, and unaware of how much they need to be saving.
Key findings of the report include:
- Millennials and Gen Z worry about finances, but make a concerted effort to save:
- 77% of respondents say that thinking about finances causes them stress, but they still understand the importance of saving early: 71% of Gen Z and 82% of Millennials do not feel too young to start saving for retirement.
- 88% of all respondents actively save some money on a monthly basis; however, 20% are saving less than$100 monthly in total, including in their retirement accounts.
- The good news: employers are stepping up, and employees are making the most of it:
- Millennials and Gen Z expect their employers to play a role: 40% of respondents would not work at a company that doesn’t offer retirement benefits or accounts.
- 72% say their employer offers a retirement savings plan, and 80% say their company matches contributions to their plan. Almost half of respondents contribute 5% or more monthly, and 75% maximize their company’s match.
- Outside of retirement plans, 48% say their employers offer other financial wellness benefits such as access to a financial advisor, financial planning tools, or student loan assistance.
- There’s still work to do; employees are tapping retirement funds early, unclear on savings reality:
- Almost half (44%) are planning to save less than $1 million for retirement, despite common advice that a minimum of $1 million is necessary.
- One in three have dipped into their retirement funds early, for reasons including paying off credit card and student debt, and covering unexpected expenses like medical bills (see chart below).
- Of concern, 23% of respondents have taken out money for travel and leisure activities.
“It’s clear that Millennials and Gen Z want to save for retirement, but this goal can be deprioritized when they’re faced with student debt, medical bills, or other expenses that arise,” said Edward Gottfried, Director of Product at Betterment for Business, which aims to deliver better retirement outcomes and personalized advice.
“It is wonderful to see so many employers offering financial wellness benefits, retirement plans and matching contributions, but that alone isn’t enough,” Gottfried said. “They should be doing more to educate young workers on things like how to best utilize these offerings, how much they should be saving, and the importance of not withdrawing money from funds early.”
Gottfried added that retirement will look very different for these younger generations, so helping them understand the fundamentals of personal finance has never been more important.
Read or download the full report here.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
