During a recent interview with PLANSPONSOR, Catherine Collinson, CEO and president of the Transamerica Institute and the Transamerica Center for Retirement Studies (TCRS), dissected key findings from the annual Transamerica Retirement Survey, just published in its 21st edition.

At a high level, the survey shows American workers remain strongly committed to their retirement savings, despite the challenges presented by the COVID-19 pandemic. The survey data shows that, despite six in 10 workers having adjusted their financial behaviors due to pandemic-related financial strain, 82% are saving for retirement.

Collinson says Gen Z workers have quickly embraced defined contribution (DC) plans. Though they might be facing short-term challenges related to debt management and emergency expenses, Collinson says this generation seems to have a solid grasp on the concept of self-funding one’s retirement.

“Among those saving for retirement, Generation Z workers started saving at age 19, while Millennials started at age 25, Generation X at age 30, and Baby Boomers at age 35,” Collinson says. “Seeing Gen Z starting off so early on their savings journey is really encouraging. I was blown away by that finding, to be honest.”

According to the TCRS data, among Gen Z workers between the ages of 18 and 23, more than 70% are saving for retirement. Their current median balance is about $26,000—a figure Collinson says is deceptively modest. While much less than the $93,000 median savings measured for all workers, this segment of savers is still very early in their careers, meaning they have substantial periods of time to take advantage of compound growth and future contributions.

“Anecdotally, I can tell you that one of my nephews graduated from college this spring, and for his college graduation present, he asked that we open an individual retirement account [IRA],” Collinson says. “Stories like this really show that the need for taking charge of one’s individualized retirement savings has sunk into the mindset of young people.”

Collinson says the retirement plan industry deserves some credit for this, but it’s also a natural extension of the fact that most people in Generation Z have parents in Generation X.

“So, their Gen X parents have been saving in 401(k)s likely for multiple decades at this point,” Collinson explains. “I think this is having a real impact on Gen Z. They can see the long-term results their parents are achieving by saving in tax-deferred accounts provided by their employers. If you think about it, Baby Boomers were mid-career before they had access to 401(k)s, and many of them still have pensions and rely heavily on Social Security.”

Thus, Millennials have had some encouragement to participate in the DC plan system, but not as much as the typical Gen Z worker entering the labor force today. And, as Collinson points out, Generation Z is likely to have even greater doubts about the viability of Social Security compared with Millennials and especially compared with Generation X and Baby Boomers—putting even more emphasis on personal savings responsibility.

Other related survey findings show 49% of workers expect to work past age 65 or do not plan to retire, an expectation that is actually higher among older workers. Indeed, 72% of Baby Boomers either expect to or are already working past age 65 or do not plan to retire, compared with 51% for Generation X, 37% for Millennials and 36% for Generation Z. 

Despite the relatively greater confidence among younger workers, only 24% are “very” confident that they will be able to fully retire with a comfortable lifestyle. Millennials (30%) are more likely to be “very” confident than Baby Boomers (21%), Generation X (19%), and Generation Z (16%).