Gen Z is particularly ambitious when it comes to retirement — but they may have a hard time achieving their lofty goals.
On average, Generation Z hopes to retire by 61, far younger than older generations expect, a new study from Charles Schwab found, echoing another survey released earlier this year. But 99% of those between 21 and 26 say they face obstacles to saving for retirement — more than any other generation.
The results underscore how important careful planning, access to resources, and smart saving are for Generation Z if they want to bridge the gap between their contradictory expectations.
“This study shows the youngest of adults are struggling with day-to-day life and don’t have proper expectations of the future; that’s a concerning combination,” said Andrew Herzog, a financial planner at the Watchman Group. “We should care because they are the future of the country, and poor education and preparation can hurt everyone.”
The study — which surveyed 1,000 U.S. 401(k) plan participants from April 19 to May 2 — found that smaller shares of older generations reported challenges to saving, including 88% of millennials, 91% of Gen X, and 86% of baby boomers. These older cohorts also expect to retire later on average. Millennials expect to retire by 64, Gen X by 65, and boomers by 68.
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What does Generation Z think is holding their retirement goals back? Inflation came in as the biggest obstacle, with 54% of respondents citing increasing prices as their biggest challenge. Keeping up with monthly expenses followed at 36% — which also touches on higher prices — and paying for unexpected expenses at 31%.
“It’s paying more at the pump. It’s paying more for groceries. It’s paying more to borrow money than you did last year. And so inflation is taking a bigger bite out of people’s paycheck today than maybe it was a year ago,” said Marci Stewart, director of communications consulting and participant education at Schwab Workplace Financial Services. “Especially with some of the younger generations where they’re not earning as much to overcome some of these increases in prices.”
Such expenses have generated a particularly high amount of stress for Zoomers, with 26% saying that financial worries impacted their ability to do their jobs. That’s compared to 22% for millennials, 15% for Gen X, and 10% for boomers.
“Younger workers are still finding their financial footing in an economic environment that is challenging for everyone,” said Brian Bender, head of Schwab Workplace Financial Services, in the study press release. “They are just starting out, so it’s no surprise that they may feel greater financial pressure, especially with such an ambitious timeline to retirement.”
That may be why Generation Z prioritizes workplace benefits over salary increases to manage costly expenses. For instance, they can ease steep healthcare and student debt costs through strong insurance plans and tuition remission from their employers — in addition to accessing critical retirement savings plans.
The study showed that 86% of Gen Z would opt for better benefits over a salary bump, compared with 74% of millennials, 60% of Gen X, and 50% of boomers.
“Those kinds of things are, in some ways, priceless, right? Because they might not otherwise be able to access them,” Dr. Corey Seemiller, an expert on Generation Z, told Yahoo Finance. “That’s pretty forward thinking for them to invest in some type of social safety net through their employer if they’re not going to get it otherwise.”
And employers are noticing, Stewart said.
“More and more employers are offering more financial wellness benefits, many offering student loan repayment programs, offering financial coaching, offering retirement plan advice or other types of counseling services,” added Stewart. “And so those are some of the things that we think that Gen Zers are really looking for.”
The survey reported that over 50% of study participants’ employers had taken steps to help mitigate their financial stress in the last year, with Gen Z employers most likely to take action. Such help included current employee benefits, increased pay, increased 401(k) match, increased current employee benefits, additional bonus, decreased hours for better work-life balance, and new employee benefits, according to the study.
Generation Z also showed a strong desire for financial guidance, per the study, which found that 62% “believe their situation warrants advice” from a professional. That’s higher than the 56% of millennials, 56% of Generation X, and 52% of boomers who said the same.
The study also found that 98% of Zoomers have sought advice from various sources including family and friends (52%), their 401(k) plan provider (37%), employer (31%), financial adviser (30%), and social media (28%).
“If you think about getting that guidance when you’re in your early 20s, about how much to save, which investments to select, and how to balance those competing financial priorities, those are some of the things that…help people create more positive outcomes,” she said.
Herzog had several tips for Zoomers as they prepare to save for retirement. First, he urged them to be self-disciplined and refrain from dipping into their retirement accounts until at least 59 years old. He also recommended they invest aggressively in a Roth IRA account for the tax benefits later in life.
“Taxes are probably going to be raised to some degree in the future. If they are, you want to shove as much as you can into a Roth account, so that despite that future with any increase in the tax rates, you won’t care as an old person because you’ll say ‘no, my assets over here are in a Roth,'” he said. “They’ve already been taxed and I paid that tax bill a long time ago.”
Herzog also cautioned Zoomers not to become too attached to a particular retirement age. Pointing out that they might live well into their 90s as people continue to live longer, he asserted that Zoomers will be unlikely to support themselves during the second half of their lives without earned income.
“Just give a little bit of a reality check,” he said. “Sixty-one might be a bit too early. Shoot for it, but don’t plan on it.”
Dylan Croll is a Yahoo Finance reporter.
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