Youngest Workers Feel They Face Most Retirement Obstacles

The youngest workers in the workforce say they are facing the most obstacles to saving for a comfortable retirement, new research shows.

For Generation Z workers between 21 and 26 years old, 99% say they are facing burdens to accumulating sufficient assets to reach a comfortable retirement, a nine-percentage-point increase from last year, according to the Charles Schwab Retirement Plan Services 401(k) Study — Gen Z Focus October 2023.

Compared to Gen Z, 88% of Millennials say they are facing retirement obstacles, as do 91% of Gen X and 86% of Baby Boomers, the Schwab data showed.

“Younger workers new in their careers are likely earning less than older workers, and they are still learning how to manage their finances overall,” says Marci Stewart, Schwab Workplace director of communications consulting and participant education, by email. “In this high-inflation environment, people with lower incomes are disproportionately impacted, since basic needs like food, shelter, clothing and transportation typically take up a larger percentage of their income.”

Schwab found that Gen Z workers reported retirement obstacles such as:

• Inflation: 54%;
• Keeping up with expenses: 36%;
• Unexpected expenses: 31%;
• Helping aging parents financially: 30%;
• Saving and/or paying for children’s education: 28%;
• Stock market volatility: 27%; and
• Paying off credit card debt: 25%.

“Saving for retirement and paying the bills doesn’t need to be an ‘either/or’ situation,” said Brian Bender, head of Schwab Workplace Financial Services, in a press release. “You can work toward multiple financial goals at once. This is especially important for younger workers to remember as student loan payments resume and become yet another monthly expense for many.”

Separate research from Corebridge found that 75% of 2,100 federal student loan borrowers said that resuming student debt payments will impact their ability to save for retirement. In order to make payments beginning this month, 22% said they plan to reduce how much they save for retirement, and 29% plan to reduce their emergency savings, according to data published last month.

On the issue of financial stress, most participants—83% of those Schwab surveyed between the ages of 21 and 70—said either stress has not affected their ability to do their job or they have not been under financial stress, while 17% said financial stress has impacted their job. Schwab reported younger workers are more impacted.

More than one-quarter of Gen Z employees (26%) said financial stress has impacted their job, compared to 22% of Millennials, 15% of Gen X and 10% of Baby Boomer workers, the survey found.

“Overall, the number of respondents saying they face obstacles to saving for retirement is steady: 89% this year and 90% last year,” Stewart adds. “The biggest individual obstacle overall is still inflation, cited by 62% of respondents this year, compared to 45% last year. We attribute this increase of inflation’s impact this year on the fact that we have been in a sustained high-inflation environment for well over a year. While the rate of inflation is slowing, prices are still high. This ongoing inflationary pressure is definitely challenging for workers.”

Employers are responding to workers’ stress, as more than half have acted in 2023 to help employees manage financial stress, Schwab found.

Employers must focus their financial wellness and retirement saving resources in areas that are the most challenging for workers, according to Stewart.

“That can go a long way toward helping to boost retention and slow job hopping among younger workers,” Stewart stated in a press release

The Schwab survey found 14% of Gen Z respondents preferred employer support offerings that address managing current expenses in order to have more money to save for retirement, while 10% expressed support for programs that help with managing debt.

The Schwab survey asked participants to select all responses that applied to the prompt: “If you could get help with retirement planning, what would you like help with?”

For all generations, the study found that 41% of employees—the largest share—would like employer support calculating how much money to save for retirement, followed by 40% that cited receiving specific advice on how to invest in a 401(k) and 38% who said they wanted employer support determining at what age they can afford to retire.

The 2023 401(k) Participant study was an online study conducted by Logica Research. The study was conducted from April 19 through May 2, with a sample of 1,000 401(k) plan participants between the ages of 21 and 70. The survey respondents work for companies with 25 or more employees, have 401(k) plans and are plan participants currently contributing to their companies’ 401(k) plans.

In order to analyze Gen Z results against other generations, an additional 100 plan participants aged 21 to 26 completed the survey. Survey respondents included participants served by approximately 15 different retirement plan providers, Schwab reported.