How Gen Z is Raising the Bar for Retirement Savings

Retirement might feel like a long way off for younger workers, but Gen Z is already thinking about it and saving up. A recent survey found that while Gen Z participates less in retirement benefits than other generations, those who do are saving more. Over half of them are putting away 11 per cent or more of their salaries, which is more than Millennials, Gen X and Baby Boomers. When asked when they want to retire, they’re aiming for an average age of 61.6, which is a few years earlier than the current average of 64 to 66.

Of course, many young workers don’t have a lot to put aside just yet because they’re just starting out in their careers and may not earn enough to save much. But those Gen Z workers who are saving are getting ahead. Even if they’re saving a little bit, starting early makes a big difference. As more people realize, the earlier you start, the more time your money has to grow. Many who started saving later wish they had started sooner, because it’s easy to worry about not having enough when retirement finally comes.

What’s Behind These Expectations?

Gen Z is prioritizing retirement savings early for a few reasons:

• Economic uncertainty: Gen Zers have seen their fair share of financial crises. The oldest members of the generation experienced the 2008 recession. They may have witnessed parents losing jobs and a significant number of home foreclosures. They’ve also experienced the economic upheaval brought on by the COVID-19 pandemic. These events have influenced their views on money and financial stability. Unlike older generations who may have felt more confident about their financial future, Gen Z grew up in an era of economic uncertainty. They’ve learned that downturns can happen at any time, so they’re taking a more cautious and proactive approach. Saving for retirement as early as possible means they’ll have a safety net if times get tough.
  
• Skepticism about pensions and government benefits: For generations before them, traditional pension plans and government programs were the main ways to save for retirement. But Gen Z is growing more skeptical about relying on these systems. With rising national debt, changes in the job market and concerns about the long-term sustainability of these programs, many young workers are unsure if they’ll provide enough when it’s their turn to retire. Factor in longer life expectancies and higher medical costs, and it’s no surprise they’re hesitant to depend on government benefits alone.
  
• Desire for flexibility: Gen Z values work-life balance. Most want schedule flexibility and the ability to manage their work hours. They want financial freedom and the flexibility to explore different passions. They don’t want to feel tied down to a job to secure their future. Instead, those who are saving for retirement early are doing so to have the freedom to retire sooner or pursue personal goals. They want to take control of their future and enjoy life on their terms, not working long past the age they want to retire.

What Can Employers Do?

If employers want to attract and keep Gen Z talent, they must reconsider how they offer retirement benefits. This generation wants options, flexibility and the tools to manage their financial futures.

Here are some ways employers can improve their benefits to meet these needs:

• Higher employer matching contributions: One of the best ways to encourage employees to save for retirement is by offering employer matching contributions. Canadian programs like the Canada Pension Plan (CPP) offer a basic level of retirement security, but many employees worry it won’t be enough to live comfortably in retirement. Offering higher employer matching to Registered Retirement Savings Plans (RRSPs) shows employees they want to help them build financial security. Most employers provide a dollar-for-dollar match for RRSP contributions.
  
• More investment choices: Gen Zers want control over how their money is invested, and they’re interested in aligning their investments with personal values. Some also prefer growth-oriented portfolios that offer higher returns. To meet this demand for flexibility, employers should consider offering a variety of investment options for retirement savings. This could include traditional choices like RRSPs, but also give employees the ability to manage their investments within those accounts.
  
• Education and financial planning resources: Gen Z is tech-savvy, but they may still be learning the ins and outs of retirement savings. Two-thirds of this generation worry about making wrong financial decisions and running out of money in retirement. Employers can help by offering resources or access to financial advisors who can guide them through financial literacy and retirement planning.

The Future of Retirement Benefits

Gen Z is setting a new standard for retirement planning, and employers who adapt will have an advantage in attracting and retaining top talent.

Contact us today so we can work together to improve your retirement benefits to meet the needs of today’s workforce.

Suggested Reading

How Employers Can Support the Well-Being of Young Workers

Gen Z: Attracting the Next Generation of Employees

What Gen Z Really Wants from Employers

Additional Resources

Payroll Integrations: 2024 Employee Financial Wellness Report