Gen Z eyes early retirement, is more open to financial advice (and AI) than older savers

Members of Generation Z (ages 26 and under) hope to retire earlier than previous generations and cite greater financial stress and more obstacles to retirement but are not shy about asking or advice, according to Charles Schwab’s annual nationwide survey of 401(k) plan participants, “2023 401(k) Participant Study – Gen Z Focus.”

The online survey of 1,000 U.S. 401(k) plan participants was conducted by Logica Research and represented 15 different retirement plan providers. Gen Z respondents to the survey said they expect to retire at age 61 in contrast with millennials (age 64), Gen X (65) and boomers (68). Meanwhile, 26% of Gen Z respondents said financial stress has impacted their ability to do their job versus 22% of millennials, 15% of Gen X and 10% of boomers.

In response to recent financial volatility, the survey found that 52% of the employers represented took actions to help employees manage their financial stress.

“It’s great that employers are already playing such a big role in helping workers manage financial stress,” said Marci Stewart, director of communications consulting and participant education at Schwab Workplace Financial Services. “Employers should continue to focus on areas that are challenging workers the most when it comes to financial wellness and retirement saving. That can go a long way toward helping to boost retention and slow job hopping among younger workers.”

Gen Z demonstrated much more willingness to sacrifice pay in return for better benefits (86% of Gen Z versus 74% of millennials, 60% of Gen X and 50% of boomers), showing the generation’s emphasis on that area. Stewart said inflation and stock market volatility have made it challenging for workers to stay on top of their savings and to moderate their spending, but “conditions like these also heighten the urgency for many people to engage with their finances, and we’re optimistic about the engagement we’ve seen between workers and their 401(k) plans.”

“Workers are asking for help with areas like calculating how much they need to save for retirement, how to invest in their 401(k)s, and how to create an income stream in retirement,” Stewart said. “Workers can build confidence when working through those questions with a financial professional. In fact, just over a quarter of workers tell us they are very confident making 401(k) investment decisions on their own, but that confidence number nearly doubles to 49% when they make those decisions with professional help.”

The survey showed that Gen Z respondents’ top-cited retirement obstacles were:

• Inflation (54%),
• Keeping up with expenses (36%),
• Unexpected expenses (31%) and
• Helping aging parents financially (30%).

Stewart pointed to a variety of ways that employers could support workers dealing with financial stress.

“To help manage financial stress, many workers report that employers have increased pay, 401(k) matches and employee benefits,” Stewart said. “Others have provided additional bonuses, decreased hours for better work-life balance and offered new benefits. It can be especially impactful for employers to provide these benefits for Gen Z workers, who feel the most affected by financial stress. Gen Z says financial stress has affected their ability to do their jobs more than any other generation.”

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Gen Z is more likely to want personalized investment advice for their 401(k) than their colleagues from other generations (83% of Gen Z versus 78% of millennials, 75% of Gen X and 62% of boomers), and Stewart said that planning is a crucial part of easing the uncertainty associated with a challenging and volatile financial environment.

“Having a plan is an important step people can take towards feeling like they are in the driver’s seat of their financial lives,” Stewart said. “According to Schwab’s Modern Wealth Survey, among those who have plotted their goals and documented a financial plan, 7 in 10 say it makes them feel more in control of their finances and 9 in 10 say they feel confident they will reach their financial goals. And although Gen Z workers in our 401(k) survey say they are more affected by financial stress … 98% say they are currently seeking financial advice from at least one source, like family and friends [52%] and 401(k) plan resources [37%]. That’s an encouraging sign of a financially strong future.”

In addition, Gen Z is the most comfortable (75%) of all the generations using AI-based digital tools for financial planning.