How to get Gen Z and millennials excited about retirement planning

It's no secret that millennials and Gen Z — the 141 million Americans born between 1981 and 2012 — view retirement differently than their peers from previous generations. A 2023 study found that Gen Z shun saving for retirement in favor of "soft saving," or putting aside small amounts of money while prioritizing personal growth and mental well-being. The study also found that three in four Gen Zers express that the economic climate makes them hesitant to set up long-term goals, and two in three believe they'll never have enough money to retire. An uncertain future means their preference is to invest in the now.

Millennials share a similar story: Their retirement readiness lags far behind Gen X and Baby Boomers. A 2022 study found that almost four in 10 millennials born in the 1980s will have inadequate retirement income, with people of color, unmarried people and those with lower levels of education in an "especially precarious" position.

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

It's hard to blame them. In the past decade, the average student loan balance has soared by 92%, while the median household income grew by just 36% over a similar period. Housing is now unaffordable for a record half of all renters in the U.S., while nearly half of voters say that student loan forgiveness is a key issue in the upcoming presidential election.

While employers cannot lower real estate prices or student loan costs, there are concrete steps that companies can make to help their Gen Z and millennial employees to be more ready for retirement. With April serving as Financial Literacy Month, now is an opportune moment for financial advisers to guide companies toward helping these groups make the first important steps.

As with everything, it all starts with education. Companies play a crucial role in educating their employees, especially younger staff, about the importance of retirement planning. For many young people, interactions with their colleagues in HR may be the first time they've engaged with the concept of retirement. Employers have the responsibility of guiding those employees toward making smart financial decisions. 

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

Beyond awareness, companies must foster a culture of financial literacy by integrating retirement planning education into both new hire onboarding and continuous learning programs, ensuring that employees recognize the importance of early and consistent contributions to their retirement accounts. This training can be tailored to meet the specific needs of employees. Gen Z and millennial staff could benefit from personalized advice on topics as diverse as managing student loan debt, climbing the housing ladder, and how to evaluate the investment options available to them within their retirement plan. Younger generations are twice as likely to invest in environmental, social and corporate governance (ESG) investments than Gen X — so learning opportunities in sustainable funds could turbocharge their engagement with retirement planning.

401(k) auto-enrollment programs are an increasingly powerful tool for ensuring young people are ready for retirement. A recent study found that half of all employers now automatically enroll employees. By jump-starting employees on their savings journey, employers significantly reduce the inertia associated with taking the first step toward a more comfortable retirement. A quarter of employers also now use auto-escalation features, through which employee contributions increase annually, keeping employees ahead of their savings journeys. 

Read more: Gen Z and millennials take the lead when saving into their 401(k)s 

There was an exciting new capability available to employers as of the beginning of 2024 that they should consider adding to their 401(k) plan: Electing to treat their employees' student loan payments as eligible for the employer's 401(k) match. This means that employees who are unable to participate either in part or fully in their 401(k) as a result of their student loan debt can still benefit from the 401(k) match, helping them to save for retirement while staying on top of their debt.

One of the biggest opportunities for employers lies with staff retention. Retaining the best team members, and keeping them happy, is crucial — and this is especially important for Gen Z and millennial staff. A 2023 Betterment survey found that these two groups were the most likely to both "quiet quit" their jobs and "rage apply" for other opportunities. The good news? They also were the most likely to join an employer that offers better financial benefits, presenting a strong opportunity for companies that encourage their employees to take financial planning seriously.  

Read more: 4 ways SECURE 2.0 will impact retirement in 2024

What's good for the employee is great for the employer: Ensuring staff are retirement ready could lead to a more productive team. Talent will become easier to attract and retain, especially so for Gen Z and millennials who place greater value on the broader benefits and values of employers. Senior executives also will want to see a return on the time and money they commit to their HR platforms. Ultimately, creating a robust retirement planning program is an investment in a company's most valuable asset: Its people. This pays dividends in the form of a happy, secure and stable team. 

Employers have to adapt to the financial preferences of Gen Z and millennials — not the other way around. By understanding their distinct challenges and views, companies can play a pivotal role in shaping their financial future for the better. Prioritizing financial education, personalized engagement programs and using mechanisms such as 401(k) auto-enrollment, employers can help to alleviate the real financial anxieties these employees face. This will not only help them as they work toward their financial future, but can enhance team morale, talent retention and hiring — a mutual benefit for employer and employee alike.