This Generation Is Actually Good at Saving for Retirement

There was a time when the word “retirement” invited a blank stare from 25-year-olds, but that may be changing for Generation Z. This is the generation of people born between 1997 and 2012, putting them in the age bracket of 13 to 28 in 2025.

Gen Zers are contributing to 401(k) plans at an earlier age than millennials, the generation just before them. Some surveys have found that Gen Z places a high value on retirement, even though they may be struggling to build their finances today.

Here’s what the research says about Gen Z’s retirement plans.

Gen Z and Their Money

While some zoomers are savvy about money, not all have the income to spare. A 2024 survey of people aged 18 to 24, conducted by the Teachers Insurance and Annuity Association of America (TIAA), found that people of this generation dedicate 51% of their budgets to housing, and 29% are living paycheck to paycheck. But 20% of them are still managing to save something for retirement.

Most members of Gen Z look to the internet for financial guidance. The TIAA survey found that 65% of respondents followed financial advisors and institutions on social media for guidance regarding money. Financial content creators have even earned their own online moniker: finfluencers. But 61% of those surveyed also look to their parents for advice.

“Most Gen Zers may keep retirement contributions in low-yielding savings because they’re afraid of the market going up or down,” says William “Bill” London, an attorney and partner with Kimura, London & White. “Assuming a long-time horizon, though, they can endure a little more risk and reap the growth.”

Gen Z’s Thoughts on Retirement

Some surveys have found that Gen Z is better prepared for retirement than Gen X, the cohort aged 44-59 in 2025. More than half – 58% – say they are reasonably sure they can save enough to retire. Only 33% of Gen X workers felt that way, and they’ve been working at it longer.

Moreover, a 2025 study by Northwestern Mutual found that the target retirement age among Generation Z is just 61.

Young workers are now twice as likely to contribute to retirement plans, thanks in part to the advent of automatic enrollment. The participation rate by this age group was just 30% in 2006 and had increased to 62% by 2021.

Automatic enrollment allows employers to automatically deduct retirement contributions from employees’ pay, unless the employee declines enrollment. The theory is that if they don’t see it in their paychecks to begin with, they won’t miss it. The Vanguard study found that the number of employers in their survey that had committed to automatic enrollment into these plans increased from 11% in 2006 to 50% in 2021, significantly helping these employees along.

Retirement Savings Plans

Many Gen Zers don’t have access to retirement plans through their employers, so they must look to other options.

“If you don’t have a 401(k) through work, which is increasingly common with gig and freelance jobs, you still have options,” according to Eve Halimi, a Gen Z co-founder and personal finance expert at Alinea Invest. “Opening an IRA (traditional or Roth) is a smart first step. The key is consistency: Start small, set up auto-contributions, and let time and compound growth do the heavy lifting.”

Anyone can establish and contribute to an individual retirement account (IRA) provided that they have earned income, according to Fidelity Investments, and you have the option of a SEP IRA if you’ve ventured into self-employment or freelancing. The self-employed can also opt for self-employed or solo 401(k)s.

Don’t Overlook the Tax Implications

Be sure to keep your tax obligations in mind, especially if you elect to set up your own retirement plan. There are distinct differences between Roth and traditional plans that affect how your income is taxed.

For traditional plans, you can claim a tax deduction for the same year as your contribution. This might sound great now, but you’ll have to pay taxes on that money in retirement when you might be less able to afford it.

For Roth plans, you’ll pay taxes on your contributions now, but you can take tax-free withdrawals of contributions and often earnings as well in retirement.

“One choice for Gen Z is a Roth IRA,” London says. “You pay with after-tax money, and qualified retirement distributions come tax-free. Most Gen Zers are just starting their careers and are likely at a lower tax rate, so it could be a wise decision to pay taxes now in exchange for tax-free retirement benefits later.”

Other Savings Options

Tax-advantaged retirement accounts can be a good ticket to a comfortable living in your later years, but you’re not limited to them. You might also want to consider some good old standbys, such as certificates of deposit or rolling the dice on the market.

“The best of both worlds is the best solution,” London says. “Use retirement accounts to take advantage of compounding over long periods and taxable accounts for mid-term goals and liquidity.”

A CD will typically pay you more interest than a savings account, and the rate is guaranteed until maturity.

“Make sure your money is actually working for you,” Halimi advises. “Don’t leave it all sitting in a low-interest savings account that’s losing value. Spread your investments across different sectors, asset types, ETFs, blue-chip stocks, and bonds to build a well-rounded portfolio.”

Tips and Potential Pitfalls

Gen Zers are planning for the long term, and a lot can happen in that span of years to derail the best-laid plans. Northwestern Mutual recommends saving 20% of your income annually and bumping it up a little when and if you get raises. It is important that you don’t touch it until retirement. “An error is taking money out early because of a job change, which can result in penalties and lost growth,” London points out.  

“Begin small but regularly. Even saving $50 to $100 per month builds momentum,” he says. “Make it automatic so it becomes a habit. Take advantage of employer matches whenever possible. It’s free money.”  

The Bottom Line

Time flies, according to that centuries-old philosophy. The premise was that it goes by more quickly as you age.

When it comes to saving for your retirement years, “the biggest pitfall is not starting at all or putting it off because it feels overwhelming,” Halimi says. “Waiting for the ‘perfect time’ means you lose the most valuable advantage you have right now: time itself.”

So go ahead and get started. You might consider opening a CD in honor of your 21^st birthday. Talk to your boss or human resources department and take advantage of that employer match with your 401(k). Take slow and thoughtful steps if you’re thinking about investing. Sit down and talk with a financial professional to guide you to your best options.