A new report from Fidelity Investments finds that over half of Millennials and Gen Z believe they will have a harder time saving for retirement due to the higher cost of living.
Fidelity's 2024 State of Retirement Planning study found that 57% of Millennials and 56% of Gen Z believe they will have a harder time saving for retirement than their parents did due to the higher cost of living – figures that are markedly higher than the 38% of Gen X and 16% of Boomers who expressed those concerns.
Respondents across generations cited higher costs from inflation, consumer debt and the need to build emergency savings as the main barriers to reaching their retirement savings goals. However, younger generations cited additional challenges such as dealing with student loan debt, saving for a home and a wedding, as well as childcare costs.
In light of those challenges, Americans of all generations said they wished they had started planning for retirement earlier. The study found that on average, Gen Z respondents said they started planning for retirement at age 20 when they wished they had started at 17, while Millennials started at 27 and wished they had at 22.
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Retirement savers noted that recent legislative changes have made it easier for them to save, such as the enactment of the SECURE 2.0 Act.
The law gave employers the ability to make contributions to workers' retirement accounts while they pay down student loan debt, and it also established emergency savings accounts of up to $2,500 for non-highly compensated employees that they and their employer can contribute to until the cap is reached.
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One-third of Gen Z respondents said they believe their employer could leverage the new law to help them save more by making a matching retirement contribution when they make their student loan payments. Additionally, one-third of Gen Z and Millennials said it will help them to save more for retirement while also building up their emergency savings.
An overwhelming majority of respondents – 85% across all four generations included in the study – said they want to retire while they are still healthy enough to be active, targeting an average retirement age of 61-62.
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However, motivating factors for retirement varied between generations, with Gen Z and Millennials saying becoming debt-free or reaching career goals are top factors, whereas Boomers said they will retire when they emotionally "feel" ready to do so.
One-in-10 Gen X respondents have not determined when they plan to retire, although they are continuing to save at Fidelity's recommended savings rate of 15% of their income, a figure which includes employer and employee contributions. Younger generations are saving an even greater percentage of their income, with Millennials saving 20% and Gen Z saving 25%.
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"Americans are approaching their 'golden years with more intention and opportunity than ever before," said Rita Assaf, vice president of retirement products at Fidelity Investments. "As more people rethink retirement, with new goals such as living abroad or starting a business, it's important to consider the potential impacts to their Social Security, Medicare and taxes."
