Young professionals today are focusing on their retirement more than ever. On average, Gen Zers begin saving for retirement at 22, compared to millennials at 27, Gen Xers at 31, and baby boomers at 37, as found in a recent survey of 4,500 US adults by Northwestern Mutual in January.

The Gen Z Super-Savers

Shared with CNBC Make It, Lillian Zhang began planning for retirement while still in college. At 20, she opened her first retirement account, a Roth IRA, after discovering them through personal finance YouTube channels. For two years, she maximized contributions using savings and earnings from summer internships. After graduating, she shifted her focus to maximizing her 401(k) with her new job. Now 24, Zhang has accumulated a six-figure sum across three retirement funds. She recently opened a Simplified Employee Pension (SEP) IRA for her content creator side business.

Zhang now represents a rising group of individuals who are part of Gen Z super-savers.

Why Do Gen Zers Want to Save Early for Retirement?

What motivates young individuals to stash away money they will not access for years?

Anxiety plays a significant role. Many worry about stagnant wages amidst rising living expenses, explains Paloma Thombley, Chief Human Resources Officer at Handshake, a job platform for college students and recent graduates.

According to Northwestern Mutual, Americans now believe they must save $1.46 million to enjoy a comfortable retirement, marking a 53% increase from 2020. Meanwhile, Thombley notes that Gen Zers observe millennials facing challenges in achieving common financial goals such as paying off student loans and purchasing homes.

Some young people witness their older relatives facing financial difficulties. According to a December survey conducted by Handshake with 2,500 college undergraduates, over half either currently support their parents or grandparents financially or anticipate doing so in the future, which is more prevalent among students of color than their white counterparts.

Meanwhile, like many others her age, Zhang lacks confidence that Social Security will be available when she retires. Social Security's trust funds are expected to be depleted by 2035, leading to benefit reductions unless Congress intervenes. This uncertainty leads Zhang to believe that relying solely on Social Security for retirement income is risky, motivating her and others to take personal responsibility for their financial futures.

Gen Zers Lean on Employers' Retirement Benefits

With doubts about government support for retirement, young individuals focus on employers who assist in covering retirement expenses.

According to data from Handshake, retirement benefits rank high on the list of priorities for the Class of 2024 when considering new job opportunities. 65% of college seniors state that they would refuse a job offer from a company that does not provide an employer-sponsored 401(k) plan.

Employers have significantly influenced Gen Z's robust retirement savings. According to a recent Vanguard report, individuals aged 18 to 24 were 32% more inclined to participate in their workplace retirement plans than older counterparts at the same age. This is attributed to increased options for automatic enrollment and improved access to plan information.

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Gen Zers Are Redefining Their Dreams

Beyond anxiety, numerous Gen Z individuals view aggressive retirement savings as a means of seizing control in an uncertain future, especially when traditional support systems are unreliable. Social media platforms contribute to this effort by creating a sense of community. Zhang notes that peers on YouTube and TikTok provided valuable insights that educational institutions and workplaces may lack, such as pre-and post-tax investment strategies, practical methods for investing retirement funds, and the significance of compound interest. Zhang also perceived retirement savings as an annual objective rather than a distant goal spanning decades.

Thombley notes that young professionals today have unprecedented access to personal finance guidance, making them acutely aware of opportunities they must seize to stay ahead. Similarly, just as they redefine workplace dynamics and career trajectories, Gen Z individuals are reshaping their perceptions of retirement, tailoring them to align with their preferences and priorities.

Regarding her retirement aspirations, Zhang is still navigating her options but remains confident that she will have the financial means to pursue her dreams. For her, the key lies in saving diligently now to ensure flexibility later on, granting her the freedom to pursue her passions without financial limitations.

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