PLANADVISER - March/April 2021 - 22

plan design | demographics
Generation Z
* Birth Years: 1997 - 20121
* Age Range: 7 - 242
* Generation Size: 67.1 million3
* Target savings amount across all savings: At least 1 times salary by age 304
FINANCIAL CHALLENGES
As the youngest segment of the workforce, Generation
Z is already making strides toward building a
retirement nest egg and overall financial well-being.
According to a Betterment for Business study, 71%
of these workers do not feel too young to begin saving
for retirement, and 88% actively save on a monthly basis- including into their
retirement plan account. Additionally, 73% contribute at least 3% of their salary to
their plan account, with 23% saving more than 8% of their monthly salary.
Workers in this age group are already contemplating their long-term savings
growth, says a Center for Generational Kinetics (CGK) survey. Twenty-eight
percent of Gen Z respondents said they plan to work in some capacity after
retirement, and 52% said they will use personal savings to finance retirement.
Thirty-five percent of those not yet saving said they plan to do so in their 20s.
Still, despite their success at saving so far, 77% said thinking about finances
causes them stress, the CGK study found.
Besides these worries, Gen Zers have soaring credit card and student loan
debt. Seventy-five percent of participants in the Betterment for Business study
reported credit card debt, while almost one in three said they owe more than
$5,000. Nearly half (47%) of the respondents in the study have student loan debt.
To cope with their debt, some Gen Zers have dipped into their retirement
savings, Betterment for Business says. Thirty-eight percent reported tapping their
retirement plan for an unexpected medical cost, while 23% said they did so to
fund a travel/leisure activity.
EFFECTIVE PLAN DESIGN ELEMENTS TO IMPROVE OUTCOMES
Steve Vernon, a research scholar at the Stanford Center on Longevity, says
financial advisers should urge Gen Zers to focus on current responsibilities-
encourage them to allocate toward paying off debt and saving for emergency
expenses before stressing retirement saving. " You have to look at what the needs
are for people in their 20s and really just starting to get established in life, " he
says. " Once you have that lens, ask yourself, what are all the ways you may be
able to help? "
Vernon says he has noticed a trend toward sidecar savings accounts and
basic financial wellness programs covering, for example, responsible uses of
credit and the basics of budgeting.
For Gen Zers who want to compound their retirement savings, applying automatic
enrollment and escalation to the retirement plan is one way to help. Betterment
for Business found that 75% of Gen Zers currently maximize their company's
match, and 50% have upped their monthly contribution over the past year.
As the work world shifts toward next-generation technology, leveraging digital
advice and platforms can help keep Gen Zers informed and engaged. Consider
recommending budgeting apps to track expenses, or emergency savings accounts
to encourage supplemental savings. A Morningstar study found that most Gen
Zers use at least one financial app for budgeting, investing or everyday banking,
and most workers log into these apps every day.
1Pew Research Center. 2Pew Research Center. 3Statista. 4
Fidelity Investments.
Generation Z
is projected to
hit $33 trillion
in income by
2030-more than
a quarter of all
global income.
- Bank of America
Gen Zers have a
strong appetite
for financial
education and
are opening
savings accounts
at younger ages
than did prior
generations.
- Kasasa
84% of Gen Zers
expect formal, onthe-job
training.
- Accenture Strategy
22 | planadviser.com March-April 2021
http://www.planadviser.com
PLANADVISER - March/April 2021

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