A few simple updates can help modernize your employer-sponsored retirement plan in preparation for the new generation of workers.
Employers have been more strategic with their benefits the last few years because they’ve found it’s key to hiring and keeping employees. That includes having a workplace retirement savings plan.
Retirement savers: Everywhere and anyone
Savers, in general, come in all ages and income levels. In our research, 50% are age 40 or younger and 53% make less than $100K annually.1 While it’s important for all generations, Gen Z (ages 18-25) is making saving for retirement a priority.
Your workforce's youngest members (ages 18-25) have more opportunity to save for retirement ... they need your help. Among those we consider Gen Z "super savers” (defer 15% or more of their salary or a minimum of $17,550 last year), our research1 shows:
- An employer-sponsored retirement plan is their No. 1 way to save.
- 28% have an annual salary of less than $35,000.
- What motivates them to save: 79% say it's to feel more financially secure and 68% report it's because they want to have a good lifestyle during retirement.
- A financial priority for the next two-to-three years is increasing the amount they contribute to their retirement plan, according to 29% of respondents.
- In addition to their 401(k) or 403(b), they also save through other accounts: 51% have a Roth IRA, 46% a heath savings account (HSA), and 32% a traditional IRA.
Being a Gen Z super saver isn't so much about income—it’s more about habits and lifestyle. Highly influenced by their parents and their upbringing, they understand that making long-term decisions or sacrifices now equates to the retirement they envision in the future.
Employer-sponsored retirement plans play a strong role
Employers are key. In fact, their sponsored retirement plans can be the "nudge" for many to start saving. Just the presence of a retirement account gave them the confidence to start putting away for that long-range goal.
Want to know more about Gen Z?
- If your business has multiple generations of employees, learn about choosing benefits, policies, plan provisions, and perks to appeal to each, including Gen Z. Read: To help attract and retain employees, offer benefits that fit life stages of workers.
- Is your company culture fit for Gen Z? Discover what they want at work and what you can do to keep up. Read: 5 business practices and work perks that matter to Gen Z employees.
Plan design updates to help Gen Z employees save more
A few simple updates can help modernize your employer-sponsored retirement plan to prepare for the newest generation of workers.
- Provide immediate eligibility and vesting. In our Gen Z research1, 87% say their employer-sponsored retirement plan will be their main source of income in retirement.
- Start, increase, or stretch an employer match to incentivize participants to increase their contributions.
- Implement automated plan design features (automatic: enrollment, escalation). A recent Principal study found that 56% of Gen Z savers said they were auto enrolled—and of those, 88% reported they started saving for retirement sooner than if they had to make the enrollment decision on their own.2
- Provide more education around other retirement savings options such as an IRA, Roth IRA, HSA (if available), and guaranteed lifetime income products.
- Offer more investment options within the sponsored retirement plan, such as managed accounts.
- Establish financial wellness programs that include building emergency savings and providing education on investments. (Request a free financial wellness guide to learn proactive steps you can take.)
- Provide access to a financial professional and online financial resources to help employees manage their savings goals. Our research1 among Gen Z savers found that 48% say a financial professional or advisor is their top trusted source for financial information.
Get timely ideas from businesses like yours.