Schwab 401(k) study finds younger workers stressed about money but optimistic about improving financial habits

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.

Catherine quote

“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. 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.”

Catherine Golladay, head of Schwab Workplace Financial Services
Catherine Golladay, head of Schwab Retirement Plan Services

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."


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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

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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.

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