WESTLAKE, Texas–(BUSINESS WIRE)–Young workers are relying on more than their 401(k)s to save for retirement as other types of investments play a bigger role in their long-term wealth management plans, according to the Annual National Survey of 401(k) Plan Members from Schwab Retirement Plan Services. While the 401(k) remains the primary retirement savings vehicle for today’s workers overall, Gen Z and Millennial workers are more likely to invest in crypto as well. -currency, real estate, annuities and small businesses, unlike older generations.
“Today’s young workers start their financial journey from a different place than older generations when they started,” said Catherine Golladay, head of Schwab Workplace Financial Services. “They are questioning traditional approaches to work and retirement as they have changed jobs and reconsidered their priorities during the pandemic. The 401(k), while still their primary retirement savings tool, is no longer seen as their only path to retirement. They see an opportunity to achieve their financial goals through various assets that make them enthusiastic about investing and committed to their financial future.
Only 37% of Gen Z workers say their first investment experience was through a 401(k), a lower proportion than Gen Y (54%), Gen X (61%) and baby boomers (61%). Instead, many Gen Z workers first got involved in investing through mobile commerce (22%), cryptocurrency (11%), traditional brokerage accounts (10%) and health savings accounts (9%).
Young workers want more choice
Over the past year, many Gen Z (38%) and Gen Y (27%) workers have changed employers and they’ve had the opportunity to take a fresh look at the way they work. save and invest. Young workers say they want a wider range of investment options and vehicles. More than 4 in 10 Gen Z and Millennial workers wish they could invest in annuities and cryptocurrencies in their 401(k). More than a third want to be able to select ESG investments, and almost as many say they are interested in fractional shares. More than 7 in 10 young workers say it’s important that their 401(k) investments reflect their personal values.
About half of all employees (48%) to whom their employer offers a health savings account (CGE) use it, mainly to pay for current health expenses. About half of Gen Z (52%) and Millennial (48%) workers also use their HSAs to save for future healthcare costs in retirement, and more than half invest their HSAs in mutual funds. mutuals and other types of investments.
“All workers want to feel heard, and that makes a powerful statement when an employer can demonstrate that their benefits reflect what employees want,” Golladay said. “Chances are that young recruits are already exploring their next job or will soon. Employers looking to retain talent should consider the savings and investment preferences of young workers when evaluating their programs. benefits.
Retirement expectations
Rising costs and market volatility continue to worry all workers, but Gen Z and Millennial workers are more likely than older workers to cite unexpected expenses, education costs and support from family members as barriers to saving for retirement.
Still, young workers remain optimistic and intend to retire early into an active lifestyle that includes enjoying life, traveling and spending time with family. Gen Z wants to retire at 60 and Millennials at 62, compared to 64 and 67 for Gen X and Baby Boomers. More than 90% of young workers say they are very or somewhat likely to reach their retirement savings goals.
Gen Z thinks they need to save $1.4 million for retirement, while Millennials estimate $1.8 million, and all generations think their savings will last about the same. Gen Z and Baby Boomers say they have enough for 25, while Millennials and Gen X say 22. However, more than a quarter of Gen Z workers don’t know how much monthly income they will need to live comfortably in retirement.
From internet to IRL: young workers launch a vast network for advice
Younger generations are more open to financial wellness tools, including online tools to help save for retirement, build an emergency savings fund, and manage debt. They are also open to the help of a finance professional to develop a plan and stay on track. In fact, Gen Z (83%) and Millennials (82%) need more personalized advice for their 401(k) than Gen X (79%) and Baby Boomers (67%). Young workers prefer human advice to computer-generated advice, but are very likely to use both, while baby boomers are less likely to follow both human and computer-generated advice.
Gen Z (24%) and Millennials (20%) are more likely to use social media for financial advice than Gen X (14%) and Baby Boomers (2%). More than a third seek advice from family and friends (40% and 35% for Gen Z and Millennials versus 24% and 16% for Gen X and Baby Boomers). Nearly half of Gen Z and Millennials want help calculating how much money they need to save for retirement. Other areas of focus include receiving 401(k) investment advice, determining retirement age, and managing expenses.
“Even with an uncertain economic outlook, young workers have many reasons to be optimistic and this is reflected in their attitude towards saving and investing,” said Brian Bender, head of Schwab Retirement. Service map. “Of course, time is on their side, but Gen Z and Gen Y employees also have access to a combination of investment choices, virtual education, tools and human guidance that generations previous ones weren’t at their age. The best news is that young workers are ready to take advantage of all these resources to help them achieve financial security.
About the survey
This online survey of US 401(k) participants was conducted by Logica Research for Schwab Retirement Plan Services, Inc. Logica Research is not affiliated with or employed by Schwab Retirement Plan Services, Inc. In total, 1 000 plan participants responded to the survey. . Survey respondents were actively employed by companies with at least 25 employees, 401(k) plan participants, and were between the ages of 21 and 70. Survey respondents were not asked if 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 4 and April 19, 2022. Detailed results are available here. To analyze how Gen Z compares to other generations, another 100 plan members between the ages of 21 and 25 completed the survey.
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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 record keeping and related services relating to retirement plans. Brokerage products and services are offered by Charles Schwab & Co., Inc.
Workplace financial services is a commercial enterprise that provides products and services through Schwab Retirement Plan Services, Inc.; Schwab share plan services; and compliance solutions. Schwab Retirement Plan Services, Inc. provides record keeping and related services relating to retirement plans. Schwab Stock Plan Services is a division of Charles Schwab & Co., Inc. that provides stock compensation plan services and brokerage solutions to corporate clients. Compliance Solutions includes Schwab Designated Brokerage Services (DBS), a division of Charles Schwab & Co., Inc. DBS provides brokerage solutions to corporate clients who monitor their employees’ securities activity. Schwab Retirement Plan Services, Inc. and Charles Schwab & Co., Inc. 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, portfolio management and financial advisory services to individual investors and investment advisers independent. Its brokerage subsidiary, Charles Schwab & Co., Inc. (SIPC member, www.sipc.org), and its affiliates offer a full range of investment products and services, including a wide selection of mutual funds; financial planning and investment advice; pension plan and equity compensation plan services; business compliance and monitoring solutions; referrals to independent paid investment advisers; and custody, operations and trading support for fee-based independent investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank, SSB (Member FDIC and Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.
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