Gen Z, millennials: Better at navigating the ‘financial vortex’ toward retirement

A new report from Goldman Sachs Asset Management explores the attitudes and circumstances that mark retirement planning for each of today’s working generations, identifying areas of both confidence and concern.

The report, “Diving Deeper into the Financial Vortex,” showed sometimes sharply different perspectives on retirement among the generations. In particular, the report, which was based on the survey of more than 5,200 people in July 2023, shows the younger generations – Gen Z and millennials – demonstrating a positive outlook that they were getting their savings on track, while the older generations, Gen X and baby boomers, more often reported falling beyond on savings and struggling to catch up before retirement.

According to Goldman Sachs, the survey results for the younger generations show that plan sponsors have made clear progress encouraging Americans to save early with automated, cost-effective solutions, such as automatic enrollment, automatic escalation and default professional asset allocation strategies. For instance, 67% of millennials and 60% of Gen Z have a personalized plan for retirement, and 69% of millennials and 68% of Gen Z report that their savings is on-track or ahead of schedule.

However, the survey results for Gen X and working baby boomers demonstrate that many were too slow to adapt to the transition to 401(k) plans from pension plans. Now, 45% of Gen X and working baby boomers say that their savings are behind schedule. A similar percentage says that they do not have personalized retirement plans.

“Studying retirement savings across generations brings into focus valuable insight into the changing macro-dynamics Americans face,” said Greg Wilson, head of retirement at Goldman Sachs Asset Management, in a press release. “With the journey growing increasingly personal, our industry must innovate solutions that better meet savers where they are. Enhanced education and advice that can help them create personalized plans should be integral to everyone’s retirement plan design.”

Here are some key findings of the report for each generation.

Gen Z (age 27 and below)

In Gen Z – the youngest of the working generations – 60% of survey respondents have a personalized financial plan with goals such as buying homes and cars and saving for vacation. The generation’s apparent proactive approach may stem in part from ambitious plans – 44% expect to retire before 60. However, their assumptions may be “aggressive,” according to Goldman Sachs, as 75% plan to retire with less than 70% of their working income, and 61% expect to fund less than 50% of retirement with personal savings, vs. Social Security or pensions.

Emergency savings was the plan enhancement most wanted by Gen Z respondents at 37%, followed closely by 36% who would like access to professional financial planning and advice services. In addition, 28% sought retirement strategy education.

Millennials (age 28-43)

Despite being the generation most impacted by the financial vortex – serious and unanticipated changes in life priorities, such as decreased or no retirement saving during time off from the workforce for caregiving of children or older family members, or job losses – 69% of millennials reported being on track for retirement, according to Goldman Sachs. Millennials are the most likely of the generations to have a personalized financial plan, at 67%, while also being the generation that most often manages their own retirement savings at 52%. In contrast, 25% manage it themselves but periodically seek advice and just 11% pay a financial advisor.

Gen X (age 44-59)

According to Goldman Sachs, the members of Generation X are starting to enter retirement earlier than expected, largely due to poor health or family issues rather than good fortune. Their top desired features are emergency savings (38%), professional advice (37%) and guaranteed income (35%).

The generation led the way for the transition away from a pension system to 401(k)s, which put more of an onus on individuals to save and prepare for their own retirements. “Their experiences with saving challenges, competing priorities, plan defaults, financial education, and more are leading to major shifts in American retirement strategies,” according to a press release accompanying the report.

Working baby boomers (age 59-77)

The Working Baby Boomers are retiring later than the retirees that preceded them in earlier generations, according to the report. Most are targeting retirement between ages 65 and 69 rather than 60 and 64. Only half of respondents in this demographic said that they are on schedule for retirement.

For this older generation, their top concern is future health care costs (37%). This generation’s most wanted retirement plan feature is guaranteed income (46%) as they get close to retirement and seek help to do it successfully, the report said. Fifty-one percent expect that part-time work will be important to their retirement income strategy.

Related: Early retirement is top goal for Gen Z, yet many don’t fund the plan

“Plan design innovations implemented over the past 20 years have helped to improve retirement savings for millions of people,” said Chris Ceder, senior retirement strategist at Goldman Sachs Asset Management, in a press release. “When plan sponsors and advisors design the next wave of solutions to meet the evolving needs of employees, it is important that they consider how emergency savings, financial education, personalized planning technology/ managed accounts, and guaranteed income fit in.”