Gen Z may be known for blowing money on the latest Taylor Swift concerts or luxury trips, but behind the youth’s passion for fancy expenditures is a responsible financial habit: investing for retirement.
Vanguard based its findings on data from the 2022 Survey of Consumer Finances, using roughly 2,700 working U.S. households to estimate how each generation was on track for retirement and whether their retirement incomes would be enough to maintain their lifestyle without exceeding their spending needs.
What’s more, the study pointed out that if all workers had access to a DC plan—such as 401(k) 403(b)s, about 6 in 10 Americans would be on track for retirement. More than 100 million Americans have access to these plans, holding more than $12 trillion in assets.
However, despite the younger cohort funneling money into their 401(k)s, the future of any further progress depends on their overall financial wellness. Even with their success in saving, many younger generations are grappling with debt repayments—from student loans, auto loans, and mounting credit card debt.
“Supporting overall financial wellness with effective planning tools is key to helping the next generation achieve lasting retirement security,” said Nicky Zhang, a Vanguard investment strategist and co-author of the research paper.
Though Gen Z may be facing debt-repayment struggles, baby boomers, even with holding over half of the nation’s wealth, are not ready to stop the 9-to-5 to retire comfortably. While the wealthiest 30% of boomers are generally on track, others may fall short.
For example, the median boomer is projected to need to replace about a third of their pre-retirement income through private and employer retirement savings, facing a shortfall of roughly $9,000 (or a quarter of their expenses).
To cope, boomers may need to consider options like tapping home equity, reducing spending, or working two additional years, the study found.
