Younger Americans Enter Workplace Retirement Plans Earlier than Gen X, Boomers

Start when you’re young.

It’s probably the most important financial advice when it comes to saving for retirement, and young Americans are heeding it far more than prior generations. On average, Gen Z and millennial savers began contributing to workplace retirement plans at ages 23 and 28, respectively, according to a Nationwide Retirement Institute survey. That’s roughly a decade earlier than each group’s predecessor: Gen X at 34 and Boomers at 40.

That head start, and an overall greater level of financial confidence, is also translating to younger clients for advisors, as over half of Gen Z and millennials say they’ve sought help from a planner. “This presents a strong opportunity for financial advisors to step in and fill this need for younger workers,” said Cathy Marasco, head of protected retirement for Nationwide.

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Starting last year, most new retirement plans were required to automatically enroll employees under the SECURE 2.0 Act. Even before that mandate, adoption was accelerating after the Pension Protection Act of 2006 streamlined and codified the process. Since the end of 2007, automatic enrollment in defined contribution plans has more than tripled, according to Vanguard research.

Many Americans now begin planning for retirement early in their careers as opposed to midway through them.

• Roughly 70% younger savers say they have a strategy to safeguard their savings before retirement, compared with 55% of Gen X and 44% of Boomers, Nationwide found.

• Younger savers check balances weekly, increase contributions annually and plan ahead for market volatility.

• Some 8 in 10 Gen Zers and millennials feel positive about their retirement plans, and nearly half say they’re confident in what they’ve saved so far. That compares with just one-third of Gen X and one-quarter of Boomers.

“The dollar amounts may be smaller, but the habits are strong, and that makes a huge difference over time,” said Nathan Sebesta, CFP and owner of Access Wealth Strategies. “Just yesterday, I had a 20-year-old meet with me who wanted to max out and start a Roth IRA.”

Never Too Late. Many older Americans regret not saving earlier, but they didn’t have the same tools, especially since 401(k)s didn’t exist until the 1980s and it took them a while to become the standard. “A later start does not mean failure, but it does require more intentional planning and higher savings rates to stay on track,” Sebesta said.

This post first appeared on The Daily Upside. To receive financial advisor news, market insights, and practice management essentials, subscribe to our free Advisor Upside newsletter.