Can a retirement plan help address generational differences in planning and saving needs?

March 15, 2023

two generations together

America’s Baby Boomers have now been receiving Social Security benefits for nearly 15 years, and subsequent generations — Generation X, Millennials and Generation Z — continue the steady march toward retirement.

While no two individuals are alike and generalizations don’t always apply, one thing all three generations after the Baby Boomers share is a growing awareness of the increasing need to plan, save and invest for retirement.

So, where are the notorious generation gaps, and how do they affect retirement saving, investing and planning decisions for workers across age groups?

And given the differences in timelines and widely varied economic experiences among the generations, what can retirement plan sponsors do to help each one achieve a more secure future?

It’s easy to fall into the trap of generational stereotyping when it comes to differences in financial and life experiences. But when a retirement plan’s offerings, features and investment options meet the needs of more employees, plan sponsors and advisors can succeed at improving both plan participation and performance — while also helping a greater number of employees look forward to a more secure retirement.

Let’s take a closer look at the distinct challenges faced by coming generations of retirement savers, so plan sponsors and advisors can be better prepared to help them achieve their retirement goals.

Generation X: on deck and up next

Often viewed as a sort of “generational middle child” between larger Baby Boomer and Millennial cohorts, Gen Xers currently range in age from their mid 40s to upper 50s. Some were just starting their careers around the same time 401(k) plans began their rapid adoption, and Gen X watched as pensions — and the retirement security they seemed to represent — all but disappeared from the workplace.

Today, 81% of Gen X workers are saving in 401(k) or similar plans, and/or outside the workplace.1 Even so, just 22% say they feel “very confident” about being able to support a comfortable lifestyle while fully retired.1

In fact, more than half of Americans in their 40s also find themselves “sandwiched” between providing care for a parent 65 or older and supporting or financially helping at least one child (including adult children).2 All together, it adds up to a complicated financial picture as the needs of parents and children often take precedence over saving for retirement.

Cuna Mutual Group’s own research finds that, while they may not always be able to prioritize retirement savings over other needs, Gen Xers worry more about having enough for retirement and the rising costs of health care than their Millennial and Gen Z counterparts.3

Millennials: experienced with uncertainty

Millennials began their careers in the years surrounding the Great Recession. They arrived on the scene with high levels of student debt and may have just been starting to feel like they were catching up when the impacts of the pandemic hit. It’s no exaggeration to say Millennials have experienced significant financial and economic turbulence as a generation.

While the Great Recession forced many to wait to buy homes, marry and/or start families, Millennial workers also began saving for retirement at an early age. Today, 76% are saving in a 401(k) or similar plan and/or outside the workplace, and they’re contributing a higher proportion of their income to retirement savings (15%) than Gen Xers (10%).1

Many Millennials have also begun joining Gen Xers in the “sandwich generation” as they cross the line into their 40s.2 But even before their parents’ needs began to affect them, the high cost and protracted payment schedules of student loans were already getting in the way of saving for retirement. 

Generation Z: time is on their side

While a smaller proportion (67%) of Gen Z workers are currently saving for retirement in an employer-sponsored 401(k) or similar plan at work and/or outside of work, they’re setting aside a larger portion of their earnings (20%) than both generations preceding Gen Z.1 Combined with their longer time horizon, this generation of savers’ discipline and diligence stand to benefit them. 

At the same time, because they’re so young, Gen Z workers are likely to experience multiple job transitions — and potential economically disruptive events — before they reach retirement. In addition, they’re generally still lower on the earnings scale than their Gen X and Millennial coworkers, and in fact many Gen Z workers have already experienced job loss and a chaotic start to their careers, as a result of the COVID-19 pandemic.

In fact, 51% of Gen Z workers surveyed said they have trouble making ends meet.1 Struggling to pay for life’s necessities makes it tough to manage debt or make a plan to save, even if they agree it’s important.

How can a plan help more generations grow their retirement savings and strengthen their financial future?

Today’s employees of all generations face wide-ranging risks to achieving a financially secure retirement. Those fortunate to have access to employer-sponsored plans may stand to benefit from plan offerings, features and investment options that can help them save more — and do more than just save.

Certain optional features may help nudge participants to save more

Features like auto-enrollment and automatic increases on employee contributions can help address inertia in eligible employees, help them maximize their investments’ time to grow and help keep their retirement savings rate in line with their income. In much the same vein, sponsor-facilitated initial meetings with an advisor or other financial professional can remove barriers between participants and financial service providers.

Retirement plan investment menu selections can improve interest

The plan’s investment menu should be thoughtfully selected with a range of options. Be sure your plan’s selections address a wide range of needs:

  • Varying risk tolerances
  • Diversification needs
  • Level of active involvement — consider target-date funds and managed funds as options
  • Interest in socially responsible investing (SRI) and/or environment, social and governance (ESG)

Financial education can help many employees in even more ways

Another simple way employers can help employees address financial well-being is by offering education programs that help increase financial literacy. This type of information can range from content that sponsors create on their own to plan-provider created, multimedia, self-serve programs.

The content of educational programs can address a wide range of topics that may be more applicable to one generation or another at different points in their careers, lives and retirement saving journeys. Subjects can range from introductory to advanced to meet any participant where they are, and information can take formats as varied as videos, articles, interactive quizzes, worksheets and more. Participants stand to improve their:

  • Ability to create and follow a budget
  • Skills in financial planning
  • Understanding of credit’s costs
  • Grasp on investment topics
  • Awareness of insurance and financial products created to address their needs

These are just a few examples of financial education topics that can help today’s generations of workers address at least the financial side of the strain and disruptions they’ve experienced over the past few decades and chart a course toward a more secure financial future.

Reach out to your plan advisor to learn more about educational tools and other resources available from Cuna Mutual Group.

1Nonprofit Transamerica Center for Retirement Studies, Emerging From the COVID-19 Pandemic: Four Generations Prepare for Retirement, October 2022.
2Pew Research, More than half of Americans in their 40s are ‘sandwiched’ between an aging parent and their own children, April 8, 2022. Source: Survey of U.S. adults conducted Oct. 18-24, 2021.