Workers in the Generation Z and millennial cohorts are starting to save earlier, engaging more actively with their workplace retirement plans and preparing for market volatility, according to survey results released Tuesday by the Nationwide Retirement Institute.
Gen Xers and baby boomers in the survey said they regret not having taken similar steps earlier in their careers.
“Younger savers are showing that early engagement and proactive planning can create confidence and resilience, while older generations offer valuable perspective on the risks of waiting to take action,” Cathy Marasco, NRI’s head of protected retirement, said in a statement.
Edelman Data and Intelligence conducted the national online survey from July 30 to Aug. 13 among 2,200 plan participants.
Smart Retirement Behaviors
The survey found that Gen Z and millennial savers started contributing to their workplace retirement plans at ages 23 and 28, on average, while Gen Xers did not start until age 34 and boomers age 40.
Seven in 10 younger savers reported that they have a strategy to safeguard their savings before retirement, compared with only 55% of Gen Xers and 44% of boomers.
Millennials, in particular, are leaning more on resources, such as their company’s HR team, retirement plan providers and financial advisors to guide their decisions. Both they and Gen Zers indicated greater familiarity with investment solutions that provide downside protection than their older counterparts, and were more likely to say they had used them.
These habits are paying off, according to the survey. Eight in 10 younger savers said they feel optimistic about their retirement plans. Nearly half also feel confident about the savings they have accumulated, compared with a third of Gen Xers and a quarter of boomers.
Missed Opportunities
More than 80% of Gen X and boomer respondents said they regret not having started to save or participate in their employer-sponsored retirement plan earlier. They also wished they had focused earlier on strategies to protect their savings from market volatility or convert assets into sustainable income in retirement.
Older savers’ regrets were compounded by serious knowledge gaps. More than three-quarters wished they had understood the power of compounding interest and the benefits of maximizing contributions when they were younger.
Worse, 54% of Gen Xers and 39% of boomers still do not understand how compounding interest works, according to the survey. And more than half have set unrealistic retirement expectations, believing that their 401(k) will provide predictable monthly income like a paycheck.
Now, older workers have to live with the consequences of these missed opportunities. A fifth said they are on the wrong track for retirement, and about a third expect to retire later than they had planned.
Economic uncertainty is adding pressure. Many reported increased anxiety about their retirement savings over the past year.
Benefits of Starting Early
NRI said The American College of Financial Services had analyzed its research and found how powerful an early start can be.
Among respondents who said they had begun saving for retirement by age 25, three-quarters expressed confidence or cautious optimism about their future, compared with just 46% of those who started later.
Even beyond that cutoff, the trend holds, according to the analysis. Optimistic savers began saving at roughly age 30 or younger, while those who reported feelings of anxiety or pessimism started around age 32 or older.
“The lesson is simple: don’t wait for the perfect moment or the perfect amount to start saving,” Eric Ludwig, director of the Center for Retirement Income at The American College, said in the statement. “Building the habit early — even with modest contributions — sets the foundation for decades of confidence and better retirement readiness.”
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