Retirement Plan Practices Under Question for New Generation of Savers

Immediate eligibility and no entry age requirement would help Generation Z benefit from the time value of money.

Members of Generation Z (ages 16 to 23) are receptive to retirement plan communication and education and have exciting potential to be financially prepared for retirement by age 70, according to a June survey of 2,000 members of Generation Z conducted by EACH Enterprise.

Findings suggest standard defined contribution (DC) plan practices may create obstacles to the retirement success of workforce entrants. 

According to EACH Enterprise, employers should consider:

  • Immediate eligibility allows this group to save right away as they expect to;
  • No entry age requirement so they reap greater benefits of the time value of money;
  • Auto enrollment at a 15% or greater default contribution rate that many deem necessary;
  • Communicate that saving 20% to 25% of pay toward retirement may be adequate; and
  • Dialogue on social media with savers who receive all information on their Wi-Fi-connected mobile handheld devices.

The survey found on average, Gen Z members believe young workers should save 28% of income for future use. Eighty-three percent say it’s important to save, and 76% want to be more financially educated.

Since Generation Z is ready to save 20% to 28% of pay, Eric Henon, president of EACH Enterprise, suggests plan sponsors and advisers aim high—say 20% of pay and approach the communication from the top down. “You may not need to save as much as 25% of 28% unless you want to leave the workforce before age 70, but you need to save at least 15% or 20% of pay over a 30- to 40-year career to be able to retire by age 70,” he says.

Nearly half of Gen Z have heard of 401(k)s through family, friends, and the media, and are eager to learn more. Half 50% believe it’s right to save for retirement in a 401(k) when they have a job, and 12% of 22- and 23-year-olds are already enrolled in a retirement savings plan.

“Employers and their advisers stand to benefit from making it easy and convenient for these young adults to save and espouse constructive financial habits at a critical time in their lives,” EACH Enterprise says.

Results of the study “Generation Z on Track Toward Retirement Success” may be purchased at