Gen Z Facing Obstacles to Retirement: Schwab Study

Nearly all—99% of Gen Z workers—say they are facing obstacles to saving for retirement, according to Charles Schwab’s annual 401(k) study.

Gen Z workers—those between the ages of 21 and 26—say challenges like inflation, monthly bills and paying for unexpected expenses could keep them from retiring comfortably—which they say they want to do at an ambitious age of 61. About a quarter of Gen Z workers (26%) say financial stress has also impacted their ability to do their job.

“Younger workers are still finding their financial footing in an economic environment that is challenging for everyone,” said Brian Bender, Schwab’s head of Workplace Financial Services. “However, saving for retirement and paying the bills doesn’t need to be an ‘either/or’ situation. You can work toward multiple financial goals at once. This is especially important for younger workers to remember as student loan payments resume and become yet another monthly expense for many.”

Other generations also reported retirement savings challenges: 88% of Millennials, 91% of Gen X and 86% of Baby Boomers say they’re facing obstacles. But these generations were less likely to say the stress has impacted their work.

Many employers have been trying to ease Gen Z’s financial worries. Among Gen Z workers, 71% said they’d received help from their employer in managing financial stress over the last year. Employers took steps such as increasing pay (31%), boosting their 401(k) match (25%), increasing or adding employee benefits (23% and 15%, respectively), providing additional bonuses (19%) and decreasing hours for better work-life balance (17%).

The study found that younger workers are more willing to forgo a salary raise in exchange for better benefits or more flexible work arrangements, like working from home more often. Older workers were less likely to agree. Only 29% of Baby Boomers said they’d trade a salary raise for more flexible working arrangements.

“It’s great that employers are already playing such a big role in helping workers manage financial stress,” said Marci Stewart, director of communications consulting and participant education at Schwab Workplace Financial Services. “Employers should continue to focus on areas that are challenging workers the most when it comes to financial wellness and retirement saving. That can go a long way toward helping to boost retention and slow job hopping among younger workers.”

Gen Z workers are more likely to want help with their retirement savings than other generations. Among those surveyed, 83% said they wanted personalized investment advice for their 401(k), compared to 78% of Millennials, 75% of Gen X and 62% of Baby Boomers. About half of Gen Z workers (48%) say they don’t know what investments to choose for their 401(k), and 41% of Gen Z workers would like help managing their current expenses so they can save more for retirement.

About half of Gen Z workers (52%) are currently seeking financial advice from their friends or family members. They’re also getting advice from their 401(k) plan providers (37%), their employers (31%), financial advisors (30%), and social media (28%). Many Gen Z workers (75%) say they’re comfortable using AI tools for help with financial planning, but they’re still more likely to follow human advice (97%) than computer-generated advice (87%).

“It’s encouraging that younger workers are so open to different sources of human and digital advice and that they are actively seeking it out,” Stewart said. “When workers engage, that’s when a professional can really help them with decision-making and financial next steps. We know having a plan in place boosts employee confidence and can lead to better outcomes.”

SEE ALSO:

• Gen Z 401(k) Balances Spike in Past Year, Fidelity Data Shows