While the 401(k) remains the top retirement savings vehicle for today's workers overall, millennial and Generation Z workers are more likely than older generations also to invest in cryptocurrency, real estate, annuities and small businesses, Schwab Workplace Financial Services reported this week.
"Younger workers today are beginning their financial journey from a different place than older generations did when they began," Catherine Golladay, head of Schwab Workplace Financial Services, said in a statement. "They are questioning traditional approaches to both work and retirement as they have changed jobs and reconsidered priorities during the pandemic."
Golladay noted that the younger generations still use the 401(k) as their primary retirement savings tool, but they see an opportunity to reach their financial goals through diverse assets that are making them excited about investing and engaged in their financial futures.
Consider Gen Z workers. Only 37% said their initial investing experience was through a 401(k), compared with 54% of millennials and 61% each of Gen Xers and baby boomers.
Instead, many Gen Z workers first got involved in investing through mobile trading, cryptocurrency, traditional brokerage accounts and health savings accounts.
Logica Research conducted an online survey in April among 1,000 U.S. 401(k) participants 21 to 70 years old who were actively employed by companies with at least 25 workers.
Younger Workers Want More Choices
According to the survey, 38% of Gen Z and 27% of millennial workers changed employers in the past year, which gave them the opportunity to take a fresh look at how they were saving and investing. Young workers said they wanted a wider range of investment options and vehicles.
Around 40% of Gen Zers and millennials said they wished they could invest in annuities and cryptocurrency in their 401(k). More than a third said they wished they could select ESG investments, and nearly as many said they were interested in fractional shares.
A majority of younger workers said it was important that their 401(k) investments reflect their personal values.
The survey found that 48% of all employees who were offered a health savings account by their employer were using it, primarily to pay current health care expenses. About half of Gen Z and millennial workers were also using their HSAs to save for future health care costs in retirement, and more than half were investing their HSAs in mutual funds and other types of investments.
"The odds are that younger hires are already exploring their next job or will be soon," Golladay said. "Employers seeking to retain talent must consider the saving and investing preferences of young workers as they evaluate their benefit programs."
