Employee Retirement Preparedness: Millennials And Gen Z

Unlike their predecessors, millennials and Gen Z-ers are facing changing economic, social and demographic trends that raise worrisome questions about retirement security.

Investing goals next to question marks

Millennials now make up the largest portion of the U.S. labor force, with Gen Z rapidly entering the workforce as well.

Unlike their predecessors, these generations are facing changing economic, social and demographic trends that raise worrisome questions about retirement security.

However, despite substantial focus on retirement products and services from the financial services industry, a large majority of millennials and Gen Z are still not adequately preparing for retirement.

Betterment for Business’ survey “Employee Retirement Preparedness: Millennials and Gen Z,” tracks the financial well-being and retirement preparedness of full-time employed U.S. millennials and Gen Z. The goal is to understand the attitudes and behavioral constraints preventing these generations of workers from taking better control of their retirement and financial wellness.

These insights can then be used to help financial institutions and advisers provide better advice and solutions to these customers. We also want to uncover just how knowledgeable this cohort is about basic 401(k) and retirement plans. With the decline of pensions and workers becoming increasingly responsible for saving for retirement on their own, that knowledge is more essential than ever before.

The Good, The Bad And The Ugly: Millennial And Gen Z Finances

Every generation is shaped by its circumstances — millennials and Gen Z are no exception. How are these two younger generations faring when it comes to finances?

The bad news:

There’s no doubt about it — younger generations are stressed about finances.

  • 77% say that thinking about finances causes them stress.
  • 20% are saving less than $100 monthly—including their 401(k) and other retirement savings accounts. Cash flow and debt challenges continue to inhibit responsible savings practices.
  • 28% also receive some type of financial assistance from parents and/or family — no surprise for a generation coming of age during the 2008 recession and dealing with record high costs of housing and healthcare.

The good news:

Despite the challenges they face (or maybe because of them), these two generations are still trying to save for retirement as early as possible. They know they should be saving, but they still need help prioritizing, due to so many other financial stressors.

  • 71% of Gen Z and 82% of millennials say they do not feel too young to start saving for retirement.
  • 88% are actively saving some money on a monthly basis (including their retirement savings plan).
  • 73% are contributing at least 3% of their monthly salary to their retirement savings plan.
  • 23% are saving over 8% of their monthly salary for retirement savings.

Figure 1: How much are Millennials and Gen Z saving each month?

On average, how much money do you save on a monthly basis including your 401(k) retirement account?

A graph that shows how much millennials and gen-zers are saving for retirement.

Challenges Of Unprecedented Debt

Unprecedented debt is dragging down both generations, delaying financial priorities and negatively impacting attitudes toward retirement.

Credit card debt makes up the largest debt segment — 75% of respondents said they owe some credit card debt and almost one in three owes more than $5000. To add to that, almost half (47%) of respondents currently owe some level of student debt.

Those with high levels of debt may need to significantly reduce their current spending rates, or face substantial lifestyle changes down the line — perhaps even having to work beyond their traditional retirement age or sacrificing desired spending in retirement.

Figure 2: Here's how student loan debt impacts financial decisions and behavior

A graph that shows how student debt impacts financial behaviour

Conflicting Priorities

While it seems as though most millennials and Gen Z understand the importance of saving for retirement, many have short-term concerns that take precedent over long-term planning.

Each month, immediate financial demands and desires leave little left for long term savings — from rent and utilities to minimum debt payments and health insurance; from groceries and children or pets to vacations and local events.

Behaviorally, it’s unsurprising: day-to-day life and needs are a visceral experience, more easily felt and understood than an account to prepare for life in 30+ years.

Figure 3: Financial priorities: Millennials vs. Gen Z

Percent indicating the following was one of their top financial priorities.

This image shows the financial priorities of millennials and gen-zers.

1 in 3 respondents are dipping into retirement funds early.

One of our more concerning findings is that one in three respondents has dipped into their retirement funds early. Life doesn’t always go according to plan — 38% of respondents had to dip into their retirement savings account because of unexpected expenses such as medical debt. Individuals can often tap their 401(k) early via hardship withdrawal, but this comes with risks and consequences and should only be considered as a last resort.

However, what is most alarming is that almost a quarter (23%) said they dipped into their accounts to fund travel / leisure activities.

Not only are they putting their ability to retire at risk and losing out on compounding investment growth, but early cash outs of retirement savings (whether cashing out a 401(k) from a former employer or dipping into an IRA) often means a 10% tax penalty on top of income taxes for the withdrawal. Dipping into retirement savings for vacation impedes on future success.

In essence, employees are starting in the right direction by putting away money for retirement but they’re not staying on track by preserving it for retirement as they should. Instead, they see it as another pool of money to be tapped into if and when ‘needs’ arise. Employers need to do more to help people recognize the benefits of keeping this money for retirement and letting it stay invested to work harder for them.

We should note that while it’s easy to point to vacations as frivolous use of intended long-term savings, a greater portion of respondents tapped savings for medical expenses and debt payments; employers looking to address poor usage of retirement savings should blend education with broader wellness measures.

Figure 4: Why Millennials and Gen Z are dipping into retirement savings early

1 in 3 respondents have dipped into their retirement funds early. Reasons why:


Finally, many millennials and Gen Z may be falling behind on their retirement savings for a number of reasons: the decision making process (how much to save, how to invest, which accounts to use) can cause action paralysis; they may have been auto-enrolled at low, insufficient rates; or the compounding value of taking action today didn’t resonate or translate to action.

Almost half (44%) of respondents have a retirement savings goal of under $1 million. The reality is that the right level of savings varies by person based on a number of factors; everything from what you earn today, where you live and how you spend, where and when you intend to retire, and how you plan to invest now and through retirement.

That’s a lot to sink into one number. Betterment for Business suggests using tools that have clear assumptions for those factors and allows you to adjust as you see fit. Such tools help you understand how actions you take today help you meet your goals — not solely focused on an arbitrary-seeming number, but rather on a projected income level you can create in retirement. Saving and investing decisions have a more visceral feeling if you can compare it to your lifestyle in today’s dollars.

Respondents know they need to save, but need help getting over the initial hurdles — deciding how much and where to save — and how to preserve the hard work they’ve put into savings, by investing well for the long term and avoiding cash outs and drains on future income for today’s needs.

The new face of retirement.

Once upon a time, when earlier generations had to walk to school in the snow uphill both ways, traditional pensions were the predominant form of retirement security.

In 1980, 38% of workers in the U.S. had a pension plan. With these traditional pension plans, employers were responsible for managing the investments, and employees, once retired, could expect set monthly payments for as long as they lived. 

Yet by 2017, only 18% of private-sector workers had access to a pension; many surviving plans are also frozen, meaning they do not cover new employees. Instead, the majority of today’s workers participate in defined contribution plans — primarily 401(k)s.

The shift away from traditional pensions has left many workers unprepared and unaware of how much they should be saving for retirement. Helping workers understand how to start investing, managing debt, and save for retirement has never been more important, especially given that younger generations are increasingly pessimistic about their retirement.

Figure 5: Millennials and Gen Z expect to retire later, or never at all

This image shows when millennials and gen-zers expect to retire.

What benefits are employers offering now?

  • 72% say their employers offer a retirement savings plan. (80% of these respondents say their company matches their contributions to the retirement savings plan).
  • 48% say employers are also offering financial wellness benefits, such as workplace programs and resources that support the financial wellness of employees.

More good news:

The majority of surveyed employees leveraging employer retirement benefits are using them to their advantage:

  • 75% are maximizing their company’s match.
  • 90%are contributing some money to their plan. Almost half (48%) are contributing 5% or more to their retirement savings plan monthly.
  • 50% have increased their monthly contribution over the last 12 months.

Are women less prepared for retirement?

We found that overall, men are more engaged than women when it comes to workplace retirement savings plans. A number of societal factors could be behind this: there still exists a significant disparity in how men and women are paid, with women earning on average 79 cents for every dollar earned by men; women are more likely to pause work to raise families or care for elder family members; and women often don’t invest with the same confidence as men.

On the flip side, it’s even more critical for women to save and invest for retirement early and often — not only do they need to make up for lower wages and fewer years in the workforce, but they need to plan for a longer retirement, given their longer average lifespans than men. When evaluating retirement savings plan utilization, employers should pay attention to gender disparity and consider ways to reach all employees.

Figure 6: Where women are falling behind on retirement preparation

This image shows where women are falling behind in retirement preparation.

Even employers who are committed to gender equality may not realize the size of this disparity in utilization and preparedness. To correct it, they will have to take intentional and proactive measures, like understanding their employee’s needs and helping them more conservatively manage longevity risk — to ensure women are taking full advantage of benefits and preparing properly for retirement.

Gig Workers And Benefits

The future of work continues to shift towards part-time/gig work, and we’re beginning to see debates around offering benefits to this segment of the workforce. California recently signed a law forcing gig companies like Uber and Lyft to reclassify their workers as employees, which would make them eligible for benefits. Gig employers to date have been hesitant to classify workers as employees and offer them benefits, but popular sentiment is against them: over three- quarters of our respondents think that companies employing gig workers should offer them retirement plan benefits. Regardless of where the law lands on the treatment of the growing number of gig workers as contractors or employees, respondents felt strongly that companies should think more broadly about how to make it easier for all workers to save through retirement.

Education, access to financial advice, and introduction to providers that make saving easy are just starting points for companies to consider.

Figure 7: Should companies employing gig-workers offer them retirement benefits?


Helping employees get a better handle on their retirement savings.

39% of respondents indicated they have funds in one or more former retirement savings plan (from a previous job, etc).

Of these respondents, nearly a quarter (23%) indicated the reason is because they don’t know how to roll over these funds. Consolidating retirement accounts, or at least being able to see information about each in one place, makes planning and execution of decisions far easier. Having separate accounts scattered across past plans also makes it difficult to invest well, assess fees, and make decisions about how to manage those assets, nevermind increasing the likelihood of losing track of savings. Plus, past employers can force out smaller balances, sometimes cashing out those benefits (further reducing savings kept for retirement use).

The above is a good problem to have — employees that are engaged and have savings in former plans are on the right path. Employers should help them make the most of their traction by:

  • Making it easy to consolidate their retirement savings (via rollovers into the 401(k) plan, or choosing a provider that can help employees handle rollovers and see outside accounts in one place).
  • Setting appropriate default savings rate for their plans, to keep the momentum going.
  • Providing tools that make it easy for employees to understand where on their savings journey they are, and their next best steps toward a successful retirement.


The economic outlook is relatively positive, salaries and bonuses at an all-time high and interest rates at historical lows; yet burdened by debt and additional financial stressors, our survey finds younger generations of employees are still struggling with their long-term financial goals. Retirement plans continue to serve as a backup plan for many who don’t have money set aside for an emergency or unexpected expenses.

The U.S. retirement landscape has changed dramatically over the past few decades. Health care costs are increasing, and so is longevity — which means workers today don’t just have more responsibility for saving for their own retirements, they also have to make those savings last, on average, for longer periods of time. Planning for retirement is now significantly more challenging.

The future of retirement will look very different for these next generations and more will be looking to employers for help navigating the personal financial issues that are part of their changing environment.

Employers should help employees save more. This report shows where employees are struggling and actions employers can take:

  • Help employees manage financial stressors by providing education and tools that look at their whole financial picture, not disjointed, piecemeal information.
  • Help them understand the benefits of starting to save early and increase their contribution rates over time, showing the impact of small changes on future incomes they can create.
  • Target additional educational and support efforts at women so they don’t lag in their contributions.
  • Help employees understand the benefits of consolidating assets into their current plan.
  • Educate employees about the dangers of using retirement savings to fund other goals/needs/wants.

Saving for retirement is about far more than picking funds and what to save that year; it’s about looking at employees’ broader financial pictures and how to best plan for their whole financial lives.


  • An online survey was conducted with a panel of potential respondents. The recruitment period was September 27- October 1, 2019.
  • A total of 1,001 respondents born between 1981-2001, living in the United States, who hold full-time jobs completed the survey. Of these a total of 695 millennials (born between 1981-1994) responded, and 306 Gen Z-ers (born between 1995-2001) responded.
  • The sample was provided by Market Cube, are search panel company. Panel respondents were invited to take the survey via an email invitation and were incentivized to participate via the panel’s established points program.