New research shows that 70% of workers between the ages of 18 and 23 are saving for retirement. Though their account balances are modest, pension experts observe that this is a promising trend, given that Gen Z has plenty of time to continue saving. Meanwhile, most Baby Boomers anticipate that they will keep working past 65.
Generational Impact of Employer Sponsored Plans
The Transamerica Center for Retirement Studies (TCRS) has published the 21st edition of its annual Retirement Survey. Company leadership points to the impact of 401k savings by Generation X on their Generation Z children:
“Gen X parents have been saving in 401(k)s likely for multiple decades at this point…I think this is having a real impact on Gen Z. They can see the long-term results their parents are achieving by saving in tax-deferred accounts provided by their employers. If you think about it, Baby Boomers were mid-career before they had access to 401(k)s, and many of them still have pensions and rely heavily on Social Security.”
…Among Gen Z workers between the ages of 18 and 23, more than 70% are saving for retirement. Their current median balance is about $26,000…. While much less than the $93,000 median savings measured for all workers, this segment of savers is still very early in their careers, meaning they have substantial periods of time to take advantage of compound growth and future contributions.
Never Retiring?
Overall, TCRS survey findings reveal that almost half (49%) of workers expect to work past age 65—or have no plans to retire at all. Tellingly, Baby Boomers, though at or nearing retirement age, have the lowest expectations of retiring: 72% expect to or are already working past age 65. Comparatively, 51% of Generation X workers , 37% of Millennials and 36% of Generation Z workers expect to retire. However, despite the relative optimism of younger workers regarding full retirement, the TCRS survey found: only 24% are “very” confident that they will be able to fully retire with a comfortable lifestyle. Millennial (30%) are more likely to be “very” confident than Baby Boomers (21%), Generation X (19%), and Generation Z (16%).
Track Results: No More Setting and Forgetting
Clearly, the efforts of retirement plan sponsors can have a tremendous impact—even across generations. With many workers across the country trying harder then ever to save, while also steering out from the disruptions caused by the pandemic, experts advise sponsors to periodically review the plan’s participation rates, deferral rates and personalized rates of return. Understanding these measures can inform plan design and communication strategies to further help participants—and the plan as a whole—achieve end goals. Increasing auto-enrollment deferral rates and adjusting the employer match are two examples of how plan design adjustments might advance plan goals—and employee saving practices.
As a plan sponsor, you have the continuous fiduciary responsibility of ensuring participants are benefitting from the plan. As such, it is critical to revisit your risk management plans periodically—and make sure that all appropriate coverage is in place and current. For example, in the event a plan participant sues over an alleged fiduciary breach—and you are personally named in the suit—what’s your coverage?
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