Why Gen Z attitudes toward retirement might surprise you

November 16, 2022

gen z attitude toward retirement

For the most part, Gen Z — born in the late 1990s or later — never knew a world without the internet. Neither are they old enough to remember the attacks on 9/11. These young digital natives watched as their parents navigated the Great Recession, as their nation elected the first Black president, and as the globe embraced social media.

Now, many Gen Zers are in their mid 20s and among the youngest in today’s workforce. Retirement is a long way off, but that doesn’t mean they’re pushing off planning for it.

Gen Z income and spending habits

You’d expect the income of the average Gen Z worker to be less than those who’ve been in the workforce longer. But the stark contrast in earnings compared to older generations might come as a surprise. 

On average, Gen Z workers earn just shy of $39,000 annually, according to the Bureau of Labor Statistics. That’s less than half (57%) of what Millennials bring in and one-third (66%) that of Gen X.1 

When it comes to spending, Gen Z spends considerably less on almost all expenses with the exception of education — $2,916 for Gen Z versus $1,080 for Millennials and $2,096 for Gen X. It’s understandable since many of them are still in college. After paying for food, housing, utilities and other expenses, the average Gen Z person is left with just a little more than $2,100 at the end of the year.1 

Gen Z retirement contributions

With meager earnings and nearly 95% of it going toward living expenses, it’s easy to assume that Gen Z workers would hold off on contributing toward a retirement fund. But a recent study by BlackRock showed that this generation is just as committed to saving as older generations.

The average Gen Z worker has a savings rate of 14%, which is in line with other working generations. Despite earning significantly less and having only a few years to stash away those savings, those under age 30 still managed to achieve an average retirement balance of $64,212. Compare that to the average Millennial who’s saved around $90,000 and has likely been in the workforce twice as long.2

Encouraging Gen Z savers to keep it up

Gen Z workers seem to be motivated to get ahead. Several factors could be driving these ambitions, such as watching their parents struggle to catch up after putting off saving for too long. Or maybe it’s because, in general, there is a heightened awareness of market conditions and retirement savings overall in the media and elsewhere.

Regardless of the reasons, plan sponsors and advisors can help them keep a good thing going by providing educational resources that share the importance of compounding interest, employer matches, consistent savings habits and more.

As many older generations know, however, younger people may prefer different styles of communication. Look for ways to engage Gen Z workers in the following ways.

  • Be visual. Can what you have to say be communicated through a short video or through online tools?
  • Align with their values. Are there ways to show how investing can align with their values of social responsibility?
  • Stay connected. How can you serve them on their preferred digital platforms?
  • Earn trust. With so many voices vying for their attention, how can yours become the one they rely on for transparency and reliable financial guidance?
  • Show respect. How can you demonstrate that younger investors have what it takes to be financially savvy and begin making a difference for their futures now?
  • Cast a vision. What steps can you take to get to know your Gen Z plan participants and help them cast a vision for retirement?

Leveraging tools made available by a plan provider can play a critical role in engaging younger generations. BenefitsForYou provides participants with resources, including a financial wellness program that is personalized to each individual’s financial journey.

1U.S. Bureau of Labor Statistics, Table 26-02. Consumer Expenditure Surveys, 2020, September 2021
2BlackRock.com, The 2022 BlackRock Read on Retirement, 2022.