Millennials and Gen Z understand the value of building a retirement fund, but face conflicting financial concerns that prevent them from adequately preparing for retirement, a new report reveals.
In “Employee Retirement Preparedness: Millennials and Gen Z,” Betterment for Business polled around 1,000 U.S. Millennials and Gen Z-ers to better understand their priorities and how employers and financial advisors can best serve their needs.
The good news is that 71% of Gen Z and 82% of Millennials say they do not feel that they are too young to start saving for retirement. Additionally, 88% of all respondents say they actively save some money on a monthly basis. The findings also show that 20% report saving less than $100 monthly in total, including in their retirement accounts.
Betterment’s study further suggests that employers are stepping up and employees are making the most of it. Seventy-two percent of respondents say their employer offers a retirement savings plan and 80% say their company matches contributions to their plan.
Additionally, the majority of surveyed employees leveraging employer retirement benefits are using them to their advantage:
- 75% are maximizing their company’s match;
- 90% are contributing to their plan, with nearly half (48%) contributing 5% or more per month and 23% contributing over 8%; and
- 50% have increased their monthly contribution over the last 12 months.
Moreover, Millennials and Gen Z expect their employers to play a role, with 40% of respondents saying they would not work for a company that doesn’t offer retirement benefits.
Outside of retirement plans, nearly half (48%) say their employers offer other financial wellness benefits such as access to a financial advisor, financial planning tools or student loan assistance.
Conflicting Priorities
The study also found that one in three respondents have dipped into retirement accounts early to address short-term financial concerns, such as paying off credit card and student debt or unexpected medical bills. More concerningly, nearly a quarter of respondents (23%) have taken money out for travel and leisure activities.
Many Millennials and Gen Zers may also be falling behind on their retirement savings due to the decision-making process (how much to save, how to invest and which accounts to use) or they may have been auto enrolled at low, insufficient rates, the study further notes.
“It's clear that Millennials and Gen Z want to save for retirement, but this goal can be deprioritized when they're faced with student debt, medical bills, or other expenses that arise,” says Edward Gottfried, Director of Product at Betterment for Business. “It is wonderful to see so many employers offering financial wellness benefits, retirement plans and matching contributions, but that alone isn't enough.”
Gottfried emphasizes that employers should be doing more to educate young workers on how to best utilize these offerings, how much they should be saving and the importance of not withdrawing money from funds early.
The online survey was conducted from Sept. 27 to Oct. 1, 2019, among a total of 1,001 respondents comprised of 695 Millennials (born 1981-1994) and 306 Gen Z-ers (born 1995-2001) living in the United States.
