Gen Z, Millennials Get Ahead at Saving for Retirement
Younger workers are taking notes from their more seasoned colleagues, as Millennials and Gen Zers report saving for retirement at earlier rates than Gen Xers and Baby Boomers.
Research from Nationwide Retirement Institute shows that on average, Gen Z and Millennial savers began contributing to workplace retirement accounts at age 23 and 28, respectively, compared to Gen Xers at age 34 and Boomers at 40.
Not only are they getting a head start in saving for retirement, but younger workers are also more engaged with retirement planning compared to older employees. These workers regularly check retirement account balances, increase contributions annually, and plan for market downturns, Nationwide reports. According to the findings, seven in 10 of Gen Zers and Millennials have a strategy to safeguard savings before retirement, compared to 55% of Gen Xers and 44% of Boomers.
“Our research highlights how different generations approach retirement – and what we can learn from them,” said Cathy Marasco, head of Protected Retirement at Nationwide, in a statement. “Younger savers are showing that early engagement and proactive planning can create confidence and resilience, while older generations offer valuable perspective on the risks of waiting to take action.”
Specifically, Millennials were likelier to rely on company resources like the human resources (HR) teams, retirement plan providers, and financial advisors.
As a result of their actions, Gen Z and Millennial workers feel a greater sense of financial and retirement conviction, with eight and ten who describe feeling “optimistic” over their retirement plans and nearly half who say they’re confident about the savings they’ve gathered.
It’s likely that younger workers are learning from the financial mistakes of Gen Xers and Boomers. Nationwide’s findings explore the financial regrets these groups have made, including 80% who regret refusing to save earlier or participate in an employer sponsored plan. Another eight in 10 wish they would have placed earlier attention on strategies to protect savings from market volatility or move assets into sustainable income in retirement.
Some continue to have trouble understanding retirement industry jargon, further impacting their future savings. While over three-quarters of older savers say they wish they understood the power of compounding interest and the benefits of maximizing contributions at a younger age, 54% of Gen Xers and 39% of Boomers still misunderstand how compounding interest works, writes Nationwide.
Such missed chances offer no financial relief for these workers, as one in five of Gen Xers and Boomers report feeling on the “wrong track for retirement” and nearly one in three who expect to retire later than initially planned.
With the new year underway, retirement plan advisors have an opportunity to connect with workers and understand their financial and retirement motives for the incoming future, as well as recommend planning tools, Marasco states. “A new year is a natural point to reset your financial habits,” said Marasco. “Workplace retirement plans are evolving to include many of the tools and protections needed to build long-term security – like income solutions, portfolio guidance and downside protection – making it easier for savers to take the next step.”
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.