From boomers to Gen Z, how to create a healthy retirement

5 ways to support the retirement needs of all generations

May 30, 2024 5:30 AM

Are your employees ready to retire?

Whether you're talking about Gen Z, millennials, Gen X or baby boomers, the answer to that question may unfortunately be: Not quite.

Just seven out of 10 Americans feel confident in their retirement preparedness, according to the Employee Benefit Research Institute's 2024 retirement confidence survey, conducted in partnership with Greenwald Research. Additionally, 23% of the current workforce expects to retire after the age of 70, or not at all.

Contributing to that stress is a perfect storm of inflation, persistently high interest rates and a job market that isn't as employee-friendly as it was in recent years. For employers looking to help shore up their workforce's savings despite these hurdles, a smart starting point — regardless of generation — is often education.

"Everybody's at a different starting point, so it's really important to learn the ways in which financial illiteracy can hurt you," David Straughan, a financial expert with MarketWatch Guides, recently told EBN. "That can be everything from getting loans that have higher interest rates than you need to be paying, or paying for overdrafts and late payments which can impact your credit."

Once employees understand their financial challenges, they can zone in on how to solve them. Ideally, an employer will offer financial tools, education and experts to facilitate this work, no matter the circumstance, Straughan says.

For example, while Gen Z needs entry-level education around budgeting and setting up their 401(k), Gen X and boomers will need more specific guidance around converting their investments to more retirement-ready assets. Understanding the nuances of each group will also reduce any stigma employees may have around discussing money at work.

"There's a tendency to have shame and moralism around money, and when you're not doing well financially you feel like you're doing something wrong," Straughan says. "A lot of times that's not the case; it's just hard for people right now. Empathy and clarity [from employers] are key."

It's important for employers to make ongoing communication a part of their financial benefits strategy, reminding employees what they have at their disposal and paving the way for money conversations to become normalized. How to meet employees where they are financially, and generationally? Catch up on our recent coverage:

Millennials’ new approach to retirement

More than half of millennials believe retirement means financial independence, not reaching a set age, according to a new survey by Iralogix, an IRA-solutions provider. Additionally, nearly 17% say they don't anticipate leaving the workforce fully; rather, they envision having more flexibility in their careers, whether that's working part-time, starting a business or pursuing a passion project.

"Millennials have gone through two pretty bad down markets, and they have a different experience than other generations," says Lowell Smith, cofounder of Iralogix. "For millennials, it's more of a lifestyle, which doesn't seem to fit the way baby boomers and the older generations are planning it out."

Read more:

Millennials don't plan on retiring at 65 — here's their new strategy

Why four generations are struggling to get retirement right

For years, studies have shown that baby boomers, Generation X, millennials and Generation Z are moving at very different speeds in the race to a secure retirement. Gen Zers, born well into the age of the 401(k), have had a leg up on their predecessors thanks to auto-enrollment and other default features in their retirement plans. To a lesser extent, the same has been true of millennials.

Gen Xers — caught in the middle, as always — came of age during America's bumpy transition from pensions to 401(k)s and missed out on many of those default features. Boomers, meanwhile, have had to contend with their own set of challenges, including the Great Recession — which happened at just the wrong time for many of them, during their peak earning years.

What does this mean for savers, and employers and advisers that support them?

Read more:

How 4 different generations approach retirement — and where they're failing

Why most Gen Z-ers are stressing about money

Eighty-six percent of Gen Z are stressed about their financial situation, a recent Brightplan survey found, and it's disproportionately affecting their engagement: Gen Z loses eight hours of productivity a week — an hour more than the average. Much of that has to do with the fact that young professionals are facing unprecedented challenges like student loan debt, earning less early in their career, finding or keeping a job with economic uncertainty, trying to buy a first home, starting a family, or having young children.

"Emerging professionals also have limited experience — if any — on how to navigate an economic downturn," says Joe Vangsgard, the chief marketing officer at BrightPlan. "Financial literacy is the lowest for Gen Z, too, so they tend to leverage friends, family, co-workers and social media for financial advice, which often results in serious financial mistakes, further setting back their ability to manage their money and work toward building wealth."

Read more:

Why 86% of Gen Z is stressed about their finances

Gen X can’t get ahead in retirement savings

Employees between the ages of 43-58 have the largest retirement savings gap of all groups, according to a new report from asset management firm Schroders. While they anticipate needing to save more than $1.1 million to retire comfortably, they expect to have around $660k in their retirement fund. Due to this gap, Gen X employees are the least confident in reaching what they consider their "dream retirement," compared to 49% of millennials and 53% of baby boomers.

"The size of the retirement savings gap facing Gen X is concerning, as they are the first generation to rely on 401(k) plans instead of pensions and are the next in line to retire," says Deb Boyden, head of U.S. defined contribution at Schroders. "Fortunately, even the oldest Gen X-ers have some time before reaching their full retirement age."

Read more:

For Gen X, reality bites when it comes to retirement

How employers can better support a multi-generational workforce

The average American loses more than $1,500 per year due to lack of financial understanding, and just over half are considered financially literate, according to a report from research company MarketWatch.

When it comes to saving and investing, their research found more than 40% of people — and over half of Gen Z — are not familiar with Roth IRA's, money market accounts and high-yield savings accounts, and 70% of those who have access to a 401(k) don't use this benefit.

"Everybody's at a different starting point," says David Straughan, a financial expert with MarketWatch Guides. How can employers drive the conversation toward retirement success?

Read more:

Struggling to support 4 generations with their financial well-being? Here's where to start