Meet the Gen Z 401(k) participant: Looking for
help at work to manage their financial life
Stress about finances has had an outsized impact on the ability
of Gen Z and Millennials to do their jobs during the pandemic,
according to the annual nationwide survey of 401(k) plan
participants from Schwab Retirement Plan Services. Almost half of
Gen Z workers (44%) and 38% of Millennials reported that financial
stress impacted their ability to do their jobs this past year,
compared to 24% of all workers. About one third of these younger
401(k) plan participants already predict that their retirement will
be delayed because of COVID-19, compared to one fifth of their
older Gen X co-workers, who still have a decade or more before
retirement at age 65.
“Gen Z workers are just starting their careers at a time of
upheaval at home and in the workplace – from new health and safety
challenges to the rapid expansion of virtual offices and dramatic
swings in our economy and markets,” said Catherine Golladay, head
of Schwab Workplace Financial Services. “It’s a stressful
environment, and young people are looking to their employers for
support. The labor market is tight, and companies have an
opportunity to attract and retain talent by providing tools and
resources that help workers manage their money.”
Employers who handle COVID-19 well can build employee loyalty.
About one quarter of Gen Z workers and one third of Millennials say
their loyalty to their employer has increased because of how their
employer managed COVID-19.
Gen Z Participants: Grappling with current challenges,
uncertain about retirement, but open to advice
As they face stress about finances and retirement, Gen Z workers
are looking for help to manage their financial lives today and to
plan for their futures.
Almost two thirds (62%) of Gen Z participants in the survey say
their financial situation warrants advice from a professional.
Compared to older generations, Gen Z is more willing to follow
computer-generated advice and human advice. One third of Gen Z
participants say they are very likely to follow computer-generated
advice versus one quarter of other generations, and 60% of Gen Z
participants are very likely to follow financial advice from a
human compared to 54% of other generations.
One in three Gen Z participants (30%) want help managing their
current expenses so that they can save more money for retirement
(vs. 22% for all other participants) and 29% want help managing
their debt (vs. 15% for all others). They are also interested in
their general financial wellness, and about half welcome online
assessment tools that can give them an overall financial picture
and action plan.
“When it comes to personal finances, Gen Z workers are mature
for their age,” said Golladay. “They are clear-eyed about the
challenges they face, looking for more tools to manage their
finances, and optimistic that the right resources will help them
improve their financial behavior.”
Looking ahead to a post-pandemic world, Gen Z is more optimistic
than other generations about adopting positive financial behaviors.
These behaviors include saving more in general (62% vs. 47% for
other generations), paying off debt (48% vs. 33%), increasing
401(k) contributions (47% vs. 36%), investing more outside their
401(k) (44% vs. 34%), and rebalancing their 401(k) (40% vs.
30%).
Saving and investing for retirement may prove even more
important for Gen Z workers than other generations. Gen Z workers
are less optimistic about reaching their retirement goals (43% are
optimistic vs. 53% of all other participants) and they expect only
7% of retirement income to come from Social Security, compared to
17% for older generations. Gen Z workers expect 36% of their
retirement income to come from their or their partner’s 401(k)
savings, less than older workers (41%).
Helping younger workers plan and save for financial
security
Across generations, 401(k) plans continue to be a must-have
benefit for workers of all ages who often struggle to keep track of
multiple accounts as they change jobs. This includes Gen Z
participants, who report having changed jobs twice already on
average.
One third (31%) of Gen Z participants feel they are not on top
of their 401(k) (vs. 23% for older participants) and half (51%)
agree they don’t know what investments to choose for their 401(k)
to have enough for retirement, compared to only 32% of older
participants.
Many Gen Z participants do know they want more investment
options in their retirement plans, a desire they share with
Millennials. Significantly more Gen Z (45%) and Millennial (52%)
participants say they wish they had an annuity that offers
guaranteed income as an option in their retirement plan, compared
to Gen X (39%) and Boomers (26%). The same is true for ESG or
socially responsible investment options, which more Gen Z (41%) and
Millennial (43%) participants say they wish they had access to in
their retirement plan compared to Gen X (29%) and Boomers (12%).
Similarly, 41% of Gen Z and 39% of Millennials say they wish they
had fractional shares as an investment option in their 401(k),
significantly more than Gen X (25%) or Boomers (13%).
Gen Z and their Millennial colleagues also have a higher degree
of interest than Gen X or Boomers in benefits beyond the 401(k),
including emergency savings accounts (Gen Z – 28% / Millennials –
31%), financial wellness programs (22%/28%), and tuition
reimbursement (22%/27%).
“Like their older colleagues, most younger workers believe a
401(k) is a must-have workplace benefit, but Gen Z and Millennials
want more investment options in their workplace plan than older
workers and more products to manage everyday finances in addition
to saving for retirement,” said Golladay. “Schwab has a range of
tailored options that offer participants help with short-term
challenges and long-term goals – from retirement plans and advice
to virtual education, tools and resources for needs outside of
their workplace plan, including the new, interactive My Financial
Guide designed to help workers take control of their financial
lives.”
About the survey
This online survey of U.S. 401(k) participants was conducted by
Logica Research for Schwab Retirement Plan Services, Inc. Logica
Research is neither affiliated with, nor employed by, Schwab
Retirement Plan Services, Inc. The survey is based on 1,000
interviews. Survey respondents were actively employed by companies
with at least 25 employees, were 401(k) plan participants and were
21-70 years old. Generation Z is 21 to 24 years old. Millennials
are 25 to 40. Gen X is 41 to 56, and Boomers are 57 to 70. 100
additional Gen Z plan participants completed the survey. Survey
respondents were not asked to indicate whether they had 401(k)
accounts with Schwab Retirement Plan Services, Inc. All data is
self-reported by study participants and is not verified or
validated. Respondents participated in the study between April 1
and April 15, 2021. Detailed results can be found here.
About Charles Schwab
At Charles Schwab, we believe in the power of investing to help
individuals create a better tomorrow. We have a history of
challenging the status quo in our industry, innovating in ways that
benefit investors and the advisors and employers who serve them,
and championing our clients’ goals with passion and integrity.
More information is available at aboutschwab.com. Follow us on
Twitter, Facebook, YouTube, and LinkedIn.
Disclosures
Schwab Retirement Plan Services, Inc. and Charles Schwab &
Co., Inc. are separate but affiliated companies and subsidiaries of
The Charles Schwab Corporation. Schwab Retirement Plan Services,
Inc. provides recordkeeping and related services with respect to
retirement plans. Brokerage products and services are offered by
Charles Schwab & Co., Inc.
Workplace Financial Services is a business enterprise which
offers products and services through Schwab Retirement Plan
Services, Inc.; Schwab Stock Plan Services; and Compliance
Solutions. Schwab Retirement Plan Services, Inc. provides
recordkeeping and related services with respect to retirement
plans. Schwab Stock Plan Services is a division of Charles Schwab
& Co., Inc. providing equity compensation plan services and
brokerage solutions for corporate clients. Compliance Solutions is
comprised of Schwab Designated Brokerage Services (DBS), a division
of Charles Schwab & Co., Inc., and Schwab Compliance
Technologies, Inc. (SchwabCT). DBS provides brokerage solutions for
corporate clients who monitor their employees' securities activity.
SchwabCT provides technology solutions for corporate clients to
help facilitate their compliance technology program implementation.
Schwab Retirement Plan Services, Inc., Schwab Compliance
Technologies, Inc., and Charles Schwab & Co., Inc. (Member
SIPC) are separate but affiliated entities, and each is a
subsidiary of The Charles Schwab Corporation.
Through its operating subsidiaries, The Charles Schwab
Corporation (NYSE: SCHW) provides a full range of securities
brokerage, banking, money management and financial advisory
services to individual investors and independent investment
advisors. Its broker-dealer subsidiary, Charles Schwab & Co.,
Inc. (member SIPC, www.sipc.org), and affiliates offer a complete
range of investment services and products including an extensive
selection of mutual funds; financial planning and investment
advice; retirement plan and equity compensation plan services;
compliance and trade monitoring solutions; referrals to independent
fee-based investment advisors; and custodial, operational and
trading support for independent, fee-based investment advisors
through Schwab Advisor Services. Its banking subsidiary, Charles
Schwab Bank, SSB (member FDIC and an Equal Housing Lender),
provides banking and lending services and products. More
information is available at www.schwab.com and
www.aboutschwab.com.
© 2021 Schwab Retirement Plan Services, Inc. All Rights
Reserved.
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Mike Peterson Charles Schwab 330-908-4334
mike.peterson@schwab.com Carly Taylor The Neibart Group
718-801-8206 SchwabRPS@neibartgroup.com
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