Vanguard says Gen Z is beating older generations in saving for retirement

• Gen Z sometimes gets a bad rap when it comes to financial wellness.

• But Vanguard says the generation is actually doing better than others in saving for retirement.

• A recent analysis shows that Gen Z members are outsaving boomers, Gen X, and millennials.

British rockers The Who famously sang the now-iconic lyrics “the kids are alright” in 1965. Decades later, they’re being proven correct despite a lot of hand-wringing to the contrary.

Gen Z, the group born between 1997 and 2012, isn’t widely associated with financial stability. The youngest adult generation is often portrayed in broad brushstrokes as either unlucky or unprepared for the future when it comes to their finances.

And yet, a new study from Vanguard says that Gen Z is not only doing alright when it comes to saving for retirement, they’re outpacing older generations, squirreling away money at higher rates than baby boomers, Gen X, and millennials.

Economists in recent years have begun to ring the alarm about older Americans’ financial health. A growing number of older people have found themselves with little to no retirement savings and have been forced to work well into their 80s.

According to the Vanguard Retirement Readiness Model, though, their grandchildren look to be on track to fare a lot better, despite reports of their dire financial situations.

“Nearly half of workers in Generation Z are projected to be financially ready for retirement, compared with 40% of baby boomers, despite carrying a greater debt burden than prior generations,” Vanguard analysts stated in a report.

The millennial generation is behind Gen Z with 42% being prepared for retirement, just above Gen X, with 41%. Baby boomers trail all others, with a readiness rate of just 40%.

What has been Gen Z’s secret to saving? It’s not side hustles or lucrative TikTok partnerships. According to Vanguard, it primarily comes down to defined contribution retirement plans that allow workers and their employers to contribute to individual retirement accounts.

“DC plans are especially helpful for younger workers, who benefit the most from potential long-term compounding,” the report states. “Universal access to a DC plan could increase the share of workers on track for retirement by 47 percentage points for Gen Z (doubling the current share) and 29 percentage points for millennials.”

The analysts noted that the odds of a worker with a DC plan achieving their personal retirement goals are twice as high as those of someone without one.

“In 2022, the median worker with DC plan access had $83,000 in non-housing net wealth (1.3x their income), while the median worker without DC plan access had $13,000 (0.4x their income).”