Amid the clouds of gloom that threaten the retirement security of some generations, there is a relative bright spot, at least according to one analyst—Generation Z. 
Gen Z—defined by the Transamerica Center for Retirement Studies as those born between 1997 and 2012—so far are exhibiting hopeful signs regarding their future retirement security, says that center. They reported such a finding in 2022, and further research they recently reported buttresses that ray of sunshine.
Saving an Early Habit
In “Emerging From the COVID-19 Pandemic: Four Generations Prepare for Retirement” issued in 2022, Transamerica reports that the first members of Gen Z to enter the workforce did so just before the pandemic. While that generation—at its entry into the workforce—has dealt with instability other generations did not at such an age, Transamerica points out at the same time that they “started saving for retirement at an unprecedented young age.”
In its 2021 survey of employees ages 18 to 24, Transamerica found that 35% considered saving for retirement to be a priority, and two-thirds—67%—were already saving for retirement in a 401(k) or similar plan or even outside of an employer-provided plan. And there’s more. They also report that the median age at which Gen Z started to save for retirement was the tender age of 19, and that the median percentage of their salaries that members of Gen Z who were participating in retirement plans were contributing to their accounts was 20%.
One year later, in “Post-Pandemic Realities: The Retirement Outlook of the Multigenerational Report,” Transamerica reports further data on Gen Z, based on interviews it conducted in 2022 with employees ages 18-26. They report virtually identical findings regarding saving for retirement and when they started doing so.
Still Some Serious Concerns
While the trends and outlook for members of Gen Z regarding retirement readiness are promising, Transamerica nonetheless also reports some notes of caution.
In 2021, they report, 35% of those they interviewed said that they were “just getting by” financially. In both 2021 and 2022, the same percentage—52%—said they had experienced at least one negative economic impact because of the pandemic. The median amount of emergency savings they had in 2022 was just half of what they said they had one year before. And in 2022, 28% had taken a hardship withdrawal and/or an early withdrawal from a 401(k), IRA, or other retirement plan.
Career volatility is another factor Gen Z will need to consider and address, Transamerica suggests in the 2023 report. They argue that members of that generation probably will change jobs often and that it is likely that they will be self-employed part of the time. Consequently, they say, members of Gen Z should be “diligent in managing their retirement savings.”
The Big Picture
Challenges aside, Transamerica finds a silver lining. They observe that members of Gen Z will have “even greater access” to 401(k)s and other employer-provided retirement plans than generations older than them. Not only that, they argue, members of Gen Z “are young and have decades” to increase their retirement savings.
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