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Young Workers Cast Wide Net for Retirement Savings Opportunities

Industry Trends and Research

While the 401(k) remains the top retirement savings vehicle for today’s workers overall, Gen Z and Millennial workers are more likely to seek out a wider range of resources, from investment options and vehicles to financial wellness tools and advice.

According to Schwab Retirement Plan Services’ annual survey of 401(k) plan participants, unlike older generations, other types of investments are likely to play a greater role in Gen Z and Millennial workers’ long-term wealth plans, including investing in cryptocurrency, real estate, annuities and small businesses.  

More than 4 in 10 Gen Z and Millennial workers wish they could invest in annuities and cryptocurrency in their 401(k). More than a third wish they could select ESG investments, and nearly as many say they’re interested in fractional shares. In addition, more than 7 in 10 younger workers say it’s important that their 401(k) investments reflect their personal values.

Similarly, about half of Gen Z (52%) and Millennial (48%) workers are also using their HSAs to save for future healthcare costs in retirement, and more than half are investing their HSAs in mutual funds and other types of investments.

These findings come as many Gen Z (38%) and Millennial (27%) workers changed employers in the past year and have had the opportunity to take a fresh look at how they are saving and investing.

“Younger workers today are beginning their financial journey from a different place than older generations did when they began,” said Catherine Golladay, Head of Schwab Workplace Financial Services. “The 401(k), while still their primary retirement savings tool, is no longer viewed as their only path to retirement. They see an opportunity to reach their financial goals through diverse assets that are making them excited about investing and engaged in their financial futures.”

In fact, only 37% of Gen Z workers say their first investing experience was through a 401(k)—lower than that of Millennials (54%), Gen X (61%) and Boomers (61%). Instead, many Gen Z workers first got involved in investing through mobile trading (22%), cryptocurrency (11%), traditional brokerage accounts (10%) and health savings accounts (9%).

Wellness and Advice

Younger generations are also more open to financial wellness tools, including online tools to help save for retirement, build an emergency savings fund, and manage debt.

They are also receptive to help from a financial professional to develop a plan and stay on track. In fact, Gen Z (83%) and Millennials (82%) see more need for personalized advice for their 401(k) than Gen X (79%) and Boomers (67%). Schwab also found that younger workers prefer human over computer-generated advice but are very likely to utilize both, while Boomers are less likely to follow both human and computer-generated advice.

Not surprisingly, Gen Z (24%) and Millennials (20%) are also more likely to use social media for financial advice than Gen X (14%) and Boomers (2%). In addition, more than a third seek advice from family and friends (40% and 35% for Gen Z and Millennials versus 24% and 16% for Gen X and Boomers, respectively).

Likewise, nearly half of Gen Z and Millennials want help calculating how much money they need to save for retirement. Other areas of interest include receiving 401(k) investment advice, determining retirement age and managing expenses.

“Even with an uncertain economic outlook, young workers have a lot of reasons to be optimistic and that’s reflected in their attitudes towards saving and investing,” says Brian Bender, Head of Schwab Retirement Plan Services. “Of course, time is on their side, but Gen Z and Millennial employees also have access to a combination of investment choices, virtual education, tools, and human advice that previous generations did not have at their age. The best news is that younger workers are open to leveraging all these resources to help them achieve financial security.”

Retirement Expectations

As to how much they think they will need to retire, Gen Z respondents think they’ll need to save $1.4 million, while Millennials estimate $1.8 million. All generations think their savings will last about the same amount of time. Gen Z and Boomers estimate having enough for 25 years, while Millennials and Gen X say 22 years. However, more than a quarter of Gen Z workers don’t know how much they will need in monthly income to live comfortably in retirement. Gen Z and Millennials were also interested in retiring at a younger age than their older counterparts.

Schwab’s survey was conducted by Logica Research between April 4–19, 2022, among 1,000 U.S. 401(k) plan participants, who were actively employed by companies with at least 25 employees and were 21-70 years old. In order to analyze Gen Z results against other generations, an additional 100 plan participants aged 21 to 25 completed the survey.