Gen Z is comprised of people born roughly between 1997 and 2012. That means the members of this generation are between the ages of 13 and 28. The youngest are just starting high school, while the oldest are still in the early stages of their careers.
Vanguard has released its "How Americans Save 2025" report, and data from the asset management company shows Gen Z is starting off slowly when it comes to saving for retirement. Here's a look at how Gen Z stacks up against older Americans and the opportunity that lies ahead for them.
Image source: Getty Images.
It's tough when you're just starting out
Graduating and getting your first job is a big step (really, it's more like a process because it can take a long time). You leave school hoping to land a great job while enjoying newfound independence as an income-earning adult. But wait, now you also have have bills to pay, a budget to set, and other responsibilities to manage.
In the midst of this transition, it can be hard for young professionals to think out far enough to worry about saving for retirement. And when you see how small your paycheck is relative to the bills you have, it can be hard to save even if you want to.
According to the How America Saves 2025 report, which analyzed the savings habits of millions of Americans participating in defined contribution plans managed by Vanguard, only about 54% of employees under 25 participate in their company's plan. For those between 25 and 34, the figure jumps to 82%. From there, the number remains fairly constant, though it does go up a few percentage points, peaking at 87% for those between 55 and 64.
But there's an important nuance here. Defined contribution plans like the 401(k) tend to offer two enrollment options. For option one, participants are automatically enrolled unless they specifically opt out of the plan. The under-25 group, which captures much of Gen Z, has a 90% participation rate when a plan features automatic enrollment. That's very promising, and these young workers are getting themselves off to a good start, even if their enrollment may not have been a conscious decision.
|
Vanguard Retirement Plan Participation Rate by Age 2024 | |||
|---|---|---|---|
| Age |
Voluntary enrollment |
Automatic enrollment |
All |
|
<25 |
25% |
90% |
54% |
|
25 to 34 |
62% |
94% |
82% |
|
35 to 44 |
71% |
94% |
86% |
|
45 to 54 |
74% |
94% |
87% |
|
55 to 64 |
75% |
95% |
87% |
|
65+ |
65% |
92% |
79% |
Data source: Vanguard.
The problem is that plans without automatic enrollment require Gen Z to specifically opt in to their company's plan at a time when their earnings potential is still limited. It's no surprise then that participation for those under 25 plummets to 25% for plans that lack automatic enrollment
There's good news here, too
First things first. If you haven't enrolled in your job's 401(k) plan, you should do so as soon as possible. Even if you save only 1% of your salary, the key is to start the savings habit early. Then, you can see over time how wealth is built. For the vast majority of people, wealth isn't like playing the lottery and hitting it big but like building a house, brick by brick, year in and year out.
The good news for Gen Z is that the participation rates of the generations ahead of you suggest you can catch up pretty quickly. The 25 to 34 age group, for example, has an overall participation rate of 82%. That big improvement comes from those with plans that lack automatic enrollment. While the 25 and under group has only a 25% participation rate in such plans, the group just ahead of it has a participation rate of 62%, more than twice as high.
Those who contribute seem to be getting the idea
There's another interesting number here: the contribution rate. That's the percentage of a person's salary they defer to their 401(k) or other account. It is a good idea to contribute as much as you can afford, up to the maximum limit, and to at least put in enough to get your employer's match, if there is one (usually worth around 4%). That said, the average contribution rate for Gen Z was 5.5% in 2024 for the plans Vanguard oversees. That's not far from the 7.7% average for all plan participants.
|
Vanguard Retirement Plan Contribution Rate | ||
|---|---|---|
|
Average deferral rate |
2015 |
2024 estimated |
|
All |
6.9% |
7.7% |
|
<25 |
4.7% |
5.5% |
Data source: Vanguard.
And the number has risen over the last decade, right along with the average for all participants. So, among those who save, there's a clear recognition that they need to save more. Again, if you aren't saving in your company's plan yet, start doing so as soon as possible. If you have to start small, that's okay. Make a plan to increase how much you save and stick to it. One of the easiest ways to do so is to increase your contribution rate as your pay increases.
Don't look at it as falling behind but as a challenge for the future
If you're in Gen Z and aren't saving anything or the amount you're saving isn't quite as high as what older generations are saving, don't fret. The older generations were in your shoes not that long ago, and they should motivate rather than discourage your saving habits.
At this point in your career, it's okay to start slowly. You may be building up an emergency fund or paying off loans. Just don't wait too long because time is your biggest ally when saving and investing for retirement.
