Gen Z Savers Starting Strong, But Risk Being Overly Optimistic

While Generation Z is off to a strong start saving for retirement, their planning assumptions may be overly optimistic even as their engagement with workplace retirement plans is not robust enough, according to a new report and analysis by Goldman Sachs.

Overall, Gen Z noted median retirement savings at around $29,001, which is relatively high when taking into account their age and place in the career ladder, reveals Goldman Sachs Asset Management’s Retirement Survey & Insights Report 2023.

Meanwhile, Gen Z is one of the generations most confident in their retirement goals, with 68% saying their savings are on-track or ahead of schedule. Another 68% reported they will be able to meet their ultimate retirement savings goals, according to the survey that broke out retirement readiness by generation and across various financial areas.

Planning Ahead

Chris Ceder, senior retirement strategist at Goldman Sachs Asset Management, says Gen Z’s optimism is partly due to them being early in their retirement savings journey. He noted that while Gen Z are just starting their career, they are also generally saving earlier than prior generations and haven’t experienced many of the financial challenges that can derail retirement savings. 

“By getting an early start, they are building positive momentum,” he says. “The goal is to maintain this momentum and save consistently throughout their career.  A key challenge for many is that competing life events can take priority.”

The study indicates that 60% of Gen Z respondents already have a personalized plan for retirement, which is the second highest among all the generations, behind Millennials. Gen Z is also most likely to have a financial plan for other large goals, says Ceder, highlighting how younger generations are taking proactive steps to manage their finances.

According to Ceder, members of Gen Z are engaged with their finances more broadly and take proactive steps to manage their retirement goals, but they are less engaged in their workplace retirement savings when compared with older generations. He says this is evidenced by their level of engagement with their retirement savings accounts in the last 12 months, which in many cases are impacted by automatic enrollment features. 

“While retirement is understandably not front of mind for those entering the work, their financial goals are,” he says. “Therefore, engaging Gen Zers to build better financial habits and resiliency, such as budgeting and emergency savings, and addressing their immediate financial challenges, such as student loan debt and home buying, are key ways to address the top-of-mind financial challenges while also setting up their long-term financial goals for success.”

Planning Assumptions

Gen Z is aiming to retire much sooner than previous generations, based on the survey. Among respondents, 44% of them plan to retire before they turn 60, with only 14% planning to retire between 65 and 69. The report stated this trend could mean that some Gen Z members might need to support themselves financially for up to 40 years of retirement due to longer life expectancy.

Furthermore, of all age groups, Gen Z individuals are the most inclined to anticipate saving less than 70% of their pre-retirement income. Additionally, 45% of Gen Z respondents foresee relying on personal savings for less than 40% of their retirement income.

“Given the declining access to pensions and Social Security reform, younger generations may expect to fund a larger portion of their retirement income from personal savings,” the study stated. “Gen Zers should be mindful that if they underprepare early in their career, it may be too difficult to catch up later in their career.”

The findings are based on a July 2023 survey conducted by Goldman Sachs Asset Management and Qualtrics Experience Management of 5,261 U.S. individuals. The survey includes 3,673 working people (age 21 to 75) and 1,588 retirees (age 50-75).