DALLAS–In what may be a surprise to many, it turns out members of Generation Z are doing a very good job at saving for retirement, and fintech may be one of the biggest reasons why.
According to a report from TIAA, some 20% of Generation Z, defined roughly as are saving for retirement. In addition, as the Wall Street Journal noted, they are also contributing to 401(k) plans at higher rates than Millennials did when they first entered the work force, according to a 2023 Vanguard study.
“Gen Z in general, and in particular women, are starting to get an understanding that the more that you save and invest, the more agency and freedom you have over your life,” Ryan Viktorin, a certified financial planner and financial consultant at Fidelity Investments, told the Journal.
What’s Going On?
Why is Gen Z better at saving?
According to the analysis, financial experts are crediting Gen Z’s ability to save more at a younger age to policy changes and advances in technology.
As the Journal reminded, a provision in the Secure 2.0 Act, which took effect in late 2022, mandates that eligible employees be automatically enrolled in new 401(k) and 403(b) plans, with the ability to opt out.
“Default enrollment and contributions really skirt around that human behavior component and just gets people started early,” Melody Evans, a wealth management adviser at TIAA, told the publication.
The Secure 2.0 Act also requires plans to offer contribution escalation — the option to increase contributions by at least 1% annually until at least 10% of an employee’s salary is being saved. That’s important, given one recent study by the Employee Benefit Research Institute that found 60% of respondents expect they will run out of money.
The Fintech Boost
Also playing a big role in better retirement planning is fintech, with the Journal noting that budgeting apps, personal finance podcasts and webinars have helped Gen Z better understand the basics of saving and investing.
Since 2020, 18- to 35-year-olds have made up 64% of new users of the micro-investing app Acorns, according to the company. Robinhood reported that 75% of customers are Gen Z or Millennial.
Then there are the financial literacy and investing podcasts specifically aimed at Gen Z are Money Moves, How to Money, the Money With Katie Show and More Money. Gen Z is also more likely to discuss finances and investment strategies with their peers, the report stated.
Christopher Lind, a 25-year-old IT business analyst in Palm Beach County, Fla., told the Wall Street Journal he often turns to Gemini, Google’s A.I. chatbot, for a better understanding of retirement and taxes.
Fin Lit Focus in Working
No matter the tool, the focus on financial literacy is working, according to the report, which noted that in 2022, 39% of 23-year-olds owned stock versus 31% of 23-year-olds in 2007, according to Ana Hernández Kent, a senior researcher at the Federal Reserve Bank of St. Louis. S
tock balances for Gen Z were also higher, with a median of $4,400 versus $3,900 for Millennials, the analysis added. “While these differences are small, the earlier start for some Gen Z households can translate into more powerful compound earnings,” Ms. Kent said.
The Center for Retirement Research at Boston College found that of those who contribute to an IRA or Roth IRA, 41% were under 40 in 2022, up from 28% in 2016, according to data from the Center. (Anyone under the age of 50 with earned income can contribute up to $7,000 to a traditional or Roth I.R.A. in 2025.)
Gen Z Women
The TIAA report revealed that more Gen Z women (54%) were saving for retirement in 401(k)s than Gen Z men (44%). The Journal noted that runs counter to other generations, where men have more funds in retirement accounts.
Gen Z men invest more outside their retirement accounts.
