Urgent wake-up call: 60% of Gen Z, millennials have less than $5K in retirement savings

The end of 2023 came with numerous signs of concern about economic turmoil; specifically, many Americans worry that they will not have enough savings for retirement.

That worry was seen again in a November YouGov poll, which found Americans expressing a lack of confidence in their retirement plans. The results of the poll, published as part of the YouGov profile series, found that two in five Americans adults said they were not confident about their retirement provisions (43%), and the lack of confidence was worse among Gen X, where nearly half (48%) expressed doubt about their financial future. Although the Silent Generation (those born in the 40s or before), showed the greatest confidence, even in that cohort, only 48% reported feeling secure about their retirement finances (48%).

The report outlines where the different generations are in their preparation for retirement and finds a “troubling” trend: “A considerable portion of Americans are at the nascent stages of saving for retirement or have not started at all,” the analysis said. “This is evident with a quarter of adults having made no financial arrangements (24%), and another 15% having saved less than $5,000. Only a sliver, 2%, report having saved over a million dollars.”

Younger generations the least prepared

As noted, those past retirement age seem to be in better shape, but even older workers or those already retired from the baby boomer generation were concerned about their savings; 28% said they were not confident about being able to afford a comfortable retirement.

But the survey found younger workers especially unprepared. “Two-fifths of Gen Z have not initiated any financial arrangements for retirement (44%), which could be attributed to their stage in life where retirement seems only a distant reality,” the report noted. “Gen Z and millennials are notably behind, with over three in five (60%) either having no savings for retirement or having saved less than $5,000. But 17% have saved between $5,000 and $50,000.”

According to Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute, it’s not unusual for young workers to be less concerned about retirement. But he pointed to several innovations that are becoming more common, which can help workers of all ages make progress on saving. These include auto-enrollment in defined contribution (DC) plans, auto-escalation to help increase the amount being saved year-to-year, and emergency savings accounts, which allow workers to have a rainy-day fund so that they don’t pull out savings from retirement plans. New legislation such as the SECURE 2.0 is also providing more tools and guidance, including adding matching contributions for student loan payments, a tool that is especially helpful with younger employees.

Related: SECURE 2.0 could help small businesses, but many are still unaware of the incentives

“Employers have also added financial wellbeing programs to help workers to better manage their overall finances which helps them better be able to save for retirement,” he added. “All these are dependent on the employer adding all these features. Some employers particularly small employers do not even offer a plan let alone any of the above features to enhance use of existing plans. Further development of plan options to small employers … and emphasizing the tax credits that are available for starting a plan from SECURE 2.0 could help increase coverage to small employers to help more workers to start to save.”

Employers can help ease worries about retirement

The new poll builds on earlier research that found that men tend to have more retirement savings than women. In addition, the savings that workers have are often slim: about half of American workers from the earlier poll said they had less than $5,000 in savings.

Copeland noted that the lower savings rates of women employees have complex causes, such as being the head of single-parent families and having lower earnings than men in general. “Better understanding of the situations that women face in their overall finances is important,” he said. “Communications that include the understanding of how to make retirement savings part of the difficult choices on how to allocate their money is important. Creating unique messages to address these differences facing women versus men could help women starting to save.”

Copeland also said employers can reinforce the idea that retirement savings is a marathon, not a sprint, and that economic turbulence today should not discourage people from saving. “Workers should not get caught up in the ups and downs of the market and the economy,” he said. “However, some workers are not going to be confident in their plans due to their situation. Making sure that plans are available to as many workers as possible and adding the features discussed above to those plans will help workers get into a better position and increase their confidence.”