Gen Z's optimistic view of retirement may turn out to be justified

It can be easy to put the idealism of youth down to a lack of experience. But when it comes to retirement outlooks, we choose to take a more optimistic view.

We recently conducted Schwab's annual 401(k) Participant Study and found Gen Z workers are the most hopeful about achieving retirement savings goals, with 50% saying they are 'very likely' to achieve their goals compared to 40% for both Boomers and Gen X.

Gen Z also expects to retire at age 60, younger than other generations, and they are more likely to believe that their lifestyle will improve in retirement.

It is reasonable to assume that older workers have the more realistic view since they are closer to retirement age, have a clearer sense of how much they need to maintain their desired lifestyle, and understand how feasible it is for them to retire comfortably based on their current situation.

But that does not necessarily mean that younger workers' optimism should be scoffed at or discounted. They are saving at a time when the range of resources available to them is far different than it was for older workers when they started out. That matters. With greater access to education and advice, and powerful new tools for both, Gen Z's optimistic view may just turn out to be right.

Access to financial wellness resources 
Retirement plan providers and advisers have evolved their offerings in recent years to provide more holistic financial wellness services to address a range of needs. And most employees (64%) told us their employer took action to help them manage financial stress in the past year, with Gen Z (81%) the most likely to vouch for their employer's support.

Many 401(k) participants today have access to professional advice, managed accounts, a myriad of online tools and resources, plus virtual live and on-demand education sessions through their plan. These sessions often cover topics like creating a financial plan, setting goals, budgeting, managing debt, building emergency savings, and investing for long-term goals. In short, there's a lot of help out there.

Widespread adoption of automatic enrollment and automatic contribution increases have done tremendous good helping workers not only to get started in their 401(k) but progressively increase how much they are saving as well.

Advice adoption 
We are also seeing more appetite among workers for advice, which they are most likely to seek through their 401(k) plan. Fifty-three percent of Gen Z thinks that their financial situation warrants professional advice, which reflects a significant increase from 47% last year. Imagine the impact three or four decades of professional financial management could have on someone's future retirement. No wonder Gen Z is optimistic.

Across generations, workers tell us they are more likely to follow human professional recommendations over computer-generated recommendations for financial advice. Gen Z is even more inclined to follow human advice (63%) than Gen X (58%) and Boomers (56%).

But technology is also an increasingly important part of the advice process for many, especially those who are just starting out. About one in four Gen Z workers are very likely to follow computer-generated recommendations for financial advice.

It is important to note that accessing human advice and digital advice is not an either/or proposition. We often see participants engage with digital tools and resources as a first step, and then connect with a human professional as a gut check before implementing recommendations. The combination of the two tends to lead to higher confidence.

We already see encouraging signs that workers are on the right path from an early age. Eighty-four percent of Gen Z tell us they know how their 401(k) is performing, 88% tell us they know how their 401(k) is invested, and 61% tell us they know what investments to choose to have enough for retirement.

Gen Z may not have as much experience as older generations, but they are off to a great start and have decades to continue building both knowledge and wealth for their nest eggs. Of course, there will be twists and turns along the way, but if innovation and engagement continue going up from here, so too does the chance for a bright future for the youngest members of our workforce.

Lee McAdoo is managing director of Schwab Retirement Plan Services, supporting employers and their employees with their overall retirement planning needs. McAdoo has been in the financial services industry since 2005 and with Schwab since 2021. She has held a variety of positions throughout her career including roles in strategy, marketing, sales and service, trading, finance, and investor education. McAdoo has a bachelor's degree from McGill University and holds a master's degree in business administration from Columbia Business School.