Strategies for retirement have changed from generation to generation, and each has faced its own set of unique obstacles along the way, including wars, a global pandemic, a changing workforce, and the shift from pensions to 401(k) and Individual Retirement Accounts (IRAs).
Defined as people born between 1997 and 2012 and ranging from ages 11 to 26, Gen Z is no different. Those in the workforce work alongside Millennials, Gen X, and Baby Boomers, though the retirement expectations and challenges differ between each.
According to a Charles Schwab 401(k) survey from October 2023, Gen Z participants reported that they expect to retire by age 61, which is three to seven years sooner than Millennials, Gen X, and Baby Boomers. Despite this expectation, Gen Z contributes less than 10% of their paychecks to a retirement account, according to a Credit Karma survey.
These statistics show an imbalance between expectations and reality. Without a proper savings strategy, retiring early becomes less likely. However, despite everything, Gen Z is a considerably young generation, with the oldest in their mid-twenties. That means there is ample time to adjust and correct retirement savings and get on track to secure a future nest egg. Read below to learn more.
A Bleak Reality
On top of retirement expectations, the Charles Schwab 401(k) survey also proved that 99% of Gen Z participants feel financial pressure due to circumstances like inflation, trouble keeping up with expenses, helping aging parents, and paying off credit card debt. While many generations before them have also faced inflationary changes, Gen Z faced special circumstances, like the COVID-19 pandemic and record-breaking inflation highs.
However, despite economic challenges, Gen Z has also been at the forefront of a changing workforce. The global COVID-19 pandemic shifted companies from an in-office to remote work environment. Working remotely through the pandemic allowed for flexibility and comfortability that many Gen Z workers were accustomed to. As organizations and companies shifted back into an office 76% of Gen Z participants indicated a willingness to forgo a higher salary for the ability to remain working remotely. Earning less money while still facing high inflationary periods and an increased cost of living only emphasizes a bleaker reality for those expecting to retire comfortably by age 61.
How to Get Back on Track
While the statistics emphasize Gen Z’s disconnect between current and future expectations, it’s not all bleak. As a young workforce, Gen Z still has time to pivot, adjusting retirement strategies and reaching for higher paying jobs to help them reach retirement goals. Read below for some tips to get back on track.
- Enroll in Tax-Advantaged Accounts: To start, review your company’s retirement planning opportunities. If they offer a 401(k) plan (ideally with matching), make sure you’re enrolled and maximizing your annual contributions. Employer matching includes your company contributing funds to your retirement plan, but only if you’re a participant, so make sure you complete the steps to enroll or reach out to your company’s HR team to get started. Additionally, you should open a Traditional or Roth IRA to save additional funds on your own. While the maximums aren’t as high as a 401(k), they do allow participants to manage the plan individually and easily. Learn more here.
- Utilizing Digital Tools: According to Business Insider, Gen Z is at an advantage digitally when it comes to saving for retirement. Growing up with the internet made them more comfortable and savvy with technology, lowering the barrier for digital retirement options like NFTs, Crypto, and other forms of digital investing and currency. In addition, they also have access to digital tools like financial apps that make it easy to succeed.
- Diversify Investments: Another way to maximize retirement efforts is by diversifying your portfolio. Having a mix of moderate, conservative, and aggressive assets will help you combat inflation, along with major dips in the market. By offsetting your losses, you will continue to grow your portfolio and amplify your retirement nest egg. Learn about the importance of diversification here.
Overall, Gen Z is facing some unique circumstances for retirement readiness but has time to pause, evaluate, and correct strategies while they’re still young.
Taking the time to review resources, learn from financial experts, and create or modify a retirement plan will help the generation stabilize their future retirement. Utilize tools such as blogs, educational TikTok and YouTube, books, and podcasts to learn more about retirement and planning for a financially fit future. Read the Slavic401k resources to learn more:
