Financially savvy younger workers still insecure about 401(k)s
Gen Z workers facing greater financial stress, looking for advice to meet their objectives.
The pandemic has placed more financial stress on Gen Z and millennials than other generations.
“Gen Z workers are just starting their careers at a time of upheaval at home and in the workplace — from new health and safety challenges to the rapid expansion of virtual offices and dramatic swings in our economy and markets,” said Catherine Golladay, head of Schwab Workplace Financial Services. “It’s a stressful environment, and young people are looking to their employers for support. The labor market is tight, and companies have an opportunity to attract and retain talent by providing tools and resources that help workers manage their money.”
Schwab Retirement Plan Services recently surveyed 401(k) plan participants nationwide. Almost half of Gen Z workers and 38 percent of millennials reported that financial stress affected their ability to do their jobs this past year, compared to 24 percent of all workers. About one-third of these younger plan participants already predict that their retirement will be delayed because of COVID-19, compared to one-fifth of those closer to retirement
As they face stress about finances and retirement, Gen Z workers are looking for help to manage their financial lives today and plan for their futures. Almost two-thirds of Gen Z participants in the survey say their financial situation warrants advice from a professional.
Compared to older generations, Gen Z is more willing to follow computer-generated advice and human advice. One-third of Gen Z participants say they are very likely to follow computer-generated advice vs. one-quarter of other generations, and 60 percent of Gen Z participants are very likely to follow financial advice from a human, compared to 54 percent of other generations.
One in three Gen Z participants want help managing their current expenses so they can save more money for retirement (vs. 22 percent for all other participants) and 29 percent want help managing their debt (vs. 15 percent for all others). They also are interested in their general financial wellness, and about half welcome online assessment tools that can give them an overall financial picture and action plan.
“When it comes to personal finances, Gen Z workers are mature for their age,” Golladay said. “They are clear-eyed about the challenges they face, looking for more tools to manage their finances and optimistic that the right resources will help them improve their financial behavior.”
Looking ahead to a post-pandemic world, Gen Z is more optimistic than other generations about adopting positive financial behaviors. These behaviors include:
- Saving more in general (62 percent vs. 47 percent for other generations),
- Paying off debt (48 percent vs. 33 percent),
- Increasing 401(k) contributions (47 percent vs. 36 percent),
- Investing more outside their 401(k) (44 percent vs. 34 percent) and
- Rebalancing their 401(k) (40 percent vs. 30 percent)
Across generations, 401(k) plans continue to be a must-have benefit for workers of all ages, who often struggle to keep track of multiple accounts as they change jobs. This includes Gen Z participants, who on average report already having changed jobs twice.
One-third of Gen Z participants feel they are not on top of their 401(k) (vs. 23 percent for older participants) and half agree they don’t know what investments to choose for their 401(k) to have enough for retirement, compared to 32 percent of older participants. Many Gen Z participants want more investment options in their retirement plans,
“Like their older colleagues, most younger workers believe a 401(k) is a must-have workplace benefit, but Gen Z and millennials want more investment options in their workplace plan than older workers and more products to manage everyday finances in addition to saving for retirement,” Golladay said.
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