Young workers are investing beyond their 401(k) for retirement and want a wider range of investments in which to invest, new data shows.

The research suggests there is an opportunity for greater allocations from retirement plan participants to alternative assets outside of the traditional 401(k) options and that young workers are investing in cryptocurrency, the Charles Schwab 2022 401(k) Participant Study—Gen Z and Millennial Focus shows.

The study shows that 43% of Gen Z respondents invest in cryptocurrency, compared to 47% of Millennials, 33% of Gen X and 4% of Baby Boomers. Across generations, 33% of workers use cryptocurrency outside of their retirement plans, but younger workers are more likely to own a broad range of investments including cryptocurrency, the study finds.

“Younger workers today are beginning their financial journey from a different place than older generations did when they began,” said Catherine Golladay, head of Schwab workplace financial services, in a statement. “They see an opportunity to reach their financial goals through diverse assets that are making them excited about investing and engaged in their financial futures.”

Overall, 32% of people surveyed reported wanting to invest in cryptocurrency, if it were an option: 46% of Gen Z, 45% of Millennials, 31% of Gen X and 11% of Baby Boomers.

“The best news is that younger workers are open to leveraging all these resources to help them achieve financial security,” said Brian Bender, head of Schwab retirement plan services, in a press release.

Young workers want a wider range of investment options and vehicles, the study finds. Across all generations surveyed, 39% said that they want to invest in annuities with guaranteed income after retirement. Among Gen Z, 41% want a guaranteed income option in their retirement plan, versus 45% of Millennials, 39% of Gen X and 28% of Baby Boomers, the study finds.

Employment changes could be driving young employees to look again at how they are saving and investing for retirement, adds Golladay.

The study shows that 18% of all workers have changed employers in the last 12 months: 38% of Gen Z, 27% of Millennials, 13% of Gen X and 7% of Baby Boomers.

“[Younger workers] are questioning traditional approaches to both work and retirement as they have changed jobs and reconsidered priorities during the pandemic,” she adds. “The 401(k), while still their primary retirement savings tool, is no longer viewed as their only path to retirement.”

Whereas for 61% of Baby Boomers and Gen X, their first investing experience is in a 401(k), compared to 37% for Gen Z, 54% of Millennials and 54% of Gen X, Schwab’s research finds.    

Regarding investment vehicles, 26% of Gen Z members surveyed  and 30% of Millennials reported that they are more likely to invest, outside of their 401(k), in index exchange-traded funds, compared to 20% of Gen X and Baby Boomers, 15%. Across generations, 23% invest in ETFs, the study shows.

Additionally, 19% of Gen Z respondents reported being likely to invest in fractional shares, compared to 17% of Millennials, 9% of Gen X and 5% for Baby Boomers, the survey finds. The overall rate for investing in fractional shares is 12%, Schwab finds. Overall, 10% invest in commodities and among Millennials 16% invest there, compared to 15% of Gen Z, the study shows.

“All workers want to feel heard, and it makes a powerful statement when an employer can demonstrate that their benefits reflect what employees want,” said Golladay. “The odds are that younger hires are already exploring their next job or will be soon. Employers seeking to retain talent must consider the saving and investing preferences of young workers as they evaluate their benefit programs.”

The online study was conducted by Logica Research for Schwab Retirement Plan Services, with 1,000 total retirement plan participants. Survey respondents were actively employed by companies with at least 25 employees, were 401(k) plan participants and between 21 and 70 years old. The survey was conducted between April 4 and April 19.