When the pandemic hit the US economy, Generation Z had just begun to enter the workforce. For many workers, and especially these young people, saving for retirement was not top-notch.
We are now at a point where many people are able to re-establish some financial stability, but young workers are still decades away from reaping the fruits of retirement planning. It would make sense if they hadn’t focused on positive financial habits and a long-term outlook. Truly not many did. Our research shows Gen Z workers seek financial help and will accept it from a variety of sources, including financial professionals, self-service tools and digital resources.
If this sounds like you, you may have questions about getting a better handle on your 401(k). Even if you’re wearing skinny jeans while reading this, I encourage you to keep reading. You may not be Gen Z, but many of these considerations are important to anyone who wants their 401(k) to support their retirement goals.
How much should I contribute?
Coping with financial priorities can sometimes make it difficult for workers to prioritize their 401(k). Credit card debt, student loans and emergency savings may seem more urgent than saving for retirement when you’re young. However, the Gen Z is up to the challenge of multitasking. We found that nearly half (47%) of Gen Z respondents would like to increase their 401(k) contributions.
It’s a smart move to start early. Saving a slice of your paycheck in your 20s can help you avoid needing to make larger contributions to your 401(k) later, when you may face even greater financial responsibilities, such as: Mortgage and child care. A contribution rate of 10 – 15% is a great goal, even if you can’t reach it out of the gate. As your income increases, consider increasing your savings rate. Just 1 or 2 percentage points each year can make a big difference over time.
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Where should I invest?
Most 401(k) plans offer a range of investment options. Without guidance, trying to choose the right one can feel overwhelming. Half of the Gen Z participants in our survey say they don’t know what to invest in enough to retire. Workers of all ages can get stuck at this stage. If you’re feeling “analysis paralysis,” a little psychology can help.
Paralysis can stem from anxiety about making the wrong decision, so consider some steps to overcome it. First, recognize your feelings of anxiety. Then, try to get perspective on the problem. You can feel reassured that setting up regular contributions to their retirement account for young workers is much more important than choosing “whole” investments. If you are decades away from retirement, you have time to explore different types of investments and recover from market volatility, as we have seen during the pandemic.
Another potential obstacle for Gen Zs is the lack of retirement investment options that reflect their values. According to our research, Gen Zs are more interested than older generations in exploring environmental, social and governance (ESG) investments. If it seems that you and these options are not available through your plan, check whether your plan also offers a self-directed brokerage account, which can be used to help you prepare your portfolio for investments. can provide access to a wide range of
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How Can I Stay on Top of My 401(k)?
There are many ways you can help yourself with retirement planning. For example, online savings calculators are widely available, usually on your 401(k) website. You can use one to set retirement goals and determine whether you’re on track. Then, add a simple, repetitive reminder to your to-do list or calendar. Make a quarterly appointment to check back in with your 401(k).
Despite the tools available, our survey found that 31% of Gen Z participants struggle to stay on top of their 401(k). This may sound discouraging, but it is actually not. Gen Zs may lack confidence about their 401(k)s, but they are remarkably self-aware and eager to learn. Nearly two-thirds of Gen Z participants say their financial situation warrants advice from a professional, and they tend to follow a mix of computer-generated (33%) and human advice (60%) to address their concerns. are interested.
Spending some time with the many retirement resources available and seeking professional advice can help Gen Xers (and all of us!) build financial confidence, literacy, and healthy habits.
The key solution is simple: The best way to invest for retirement is to just start.
The information provided here is from Schwab Retirement Plan Services Inc. (SRPS) and is for informational purposes only. None of the information is recommended by SRPS. The information is not intended to provide tax, legal or investment advice; Please consult with your accountant or investment advisor for how this applies to your specific situation. SRPS does not guarantee the suitability or potential value of any particular investment or information source. Some of the information provided here may be subject to change. Any information contained herein may not be copied, assigned, transferred, disclosed or used without the express written approval of SRPS and its affiliates.
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