The Gen Z retirement crisis: 1 in 3 aren't saving, experts say

According to a new report from Bankrate, more than 30% of Generation Z have saved nothing for retirement over the past two years. And across generations, savers feel like they havent yet hit their retirement savings goals with 30% of Gen Z, 46% of millennials, 65% of Gen X, and 71% of baby boomers reporting that they feel behind on their retirement savings. 

There are many reasons Gen Z workers may not be saving for retirement, says Colleen Carcone Director, Wealth Planning Strategies at TIAA.  The past several years have been somewhat turbulent for the job market. In 2020, the pandemic shuttered businesses around the globe leaving many unemployed, and while unemployment rates have returned to pre-pandemic levels, many find themselves struggling to save. Younger workers were impacted more significantly than the overall population, and that lack of income may have meant a lack of savings. 

Key challenges to saving for retirement 

Gen Z faces a unique set of challenges to saving for retirement, due in part to the current economic conditions and their position as the youngest working generation. While there are countless reasons why some workers may have hit pause on saving for retirement, some of the key obstacles include: 

1. Less time in the workforce: The oldest members of Gen Z are in their mid-twenties and in the best cases have three to four years worth of experience in the workforce. For those using an employer-sponsored plan as their savings vehicle, they still havent had much time on their side to build up substantial savings. Theyre also more likely to earn less, being that many of them have just started their careers. The typical annual salary for Generation Z workers was $32,500 in 2021, according to research by GoBankingRates. 
2. Competing financial obligations: Gen Zers face a number of more immediate financial to-dos that often take precedence over far-off milestones like retirement. There are other needs competing for their hard-earned dollars, says Carcone. Whether paying rent or a mortgage, providing for a child, or the burden of student loan debt, retirement savings often falls lower on the list. And many think I am not going to retire for 30, 40, or even 50 years, there is plenty of time to start saving, but that thought process may have a significant impact on their overall savings.
3. Rising inflation rate: According to the October Consumer Price Index (CPI), over the last 12 months, the all items index increased 7.7% (before seasonal adjustment). Higher costs on basic living expenses and everyday goods have made a deep mark on the wallets of many, including younger workers. 

How Gen Zers can save more for retirement 

Hitting pause on your retirement savings can be a risky move. It could mean missing out on free money from employer or IRA matches, significantly alter your quality of life in your later years, and prolong your retirement timeline. For Gen Zers who want to get their savings on track and set themselves up to thrive in the future, experts say there are a few ways you can get back in the drivers seat. 

1. Dont leave your employer match on the table. Many employers who offer an employer-sponsored retirement plan like a 403(b) or 401(k) plan offer a match to savers who contribute a certain amount to their retirement account (usually 3% to 5% of your income). If you make $55,000 a year and save 3% of that salary, your companies could match that 3%. Thats $1,650 from you and another $1,650 from them. If you dont save that full 3%, youre leaving free money on the table, says Carcone. 
2. Consider a Roth IRA. A Roth IRA is a type of account that allows consumers to save for retirement in a tax-advantaged way, with a Roth account, you invest dollars that you have already paid tax on and all qualified distributions are income-tax-free. For those that are younger in their careers, this provides a longer period of time before those monies would be used for retirement and a much longer amount of time for this tax-free growth, says Carcone.
3. Eliminate steep debt balances. Many Gen Zers are saddled with student loan debt, which could make it more tempting to delay or put off saving for retirement altogether. According to a Department of Education analysis, the cumulative federal student loan debt stands at $1.6 trillion and rising for more than 45 million borrowers. Gen Zers have, on average, $20,900 in student debtthats 13% more than millennials, according to the Fed. And 7.7% of Gen Zers have balances over $50,000. Focus on implementing a debt repayment strategy that will help you chip away at your loans and work toward saving more over time for your future self. The more you pay down, the more you can put away for your golden years. 

The takeaway 

Saving enough to support yourself once youve checked out of the workforce is no easy feat. However, the key to saving enough to comfortably support yourself is to start early and make saving for retirement a constant priority. As your income changes, reevaluate how much youre putting away, and make tweaks to increase or decrease that amount depending on what feels manageable. However, the goal is to remain consistent over time and look for ways to make those savings grow through strategic investments, savings vehicles, and matches.