By Mark Olsen, Managing Director at PlanPILOT
Many plan sponsors are discovering that traditional benefit programs are no longer resonating with younger employees. Low retirement plan participation, rising turnover, and disengagement can signal a disconnect between what employers offer and what Generation Z actually needs.
As members of Gen Z (born between 1997 and 2012) enter the workforce, they bring different financial pressures, expectations, and digital habits. Many are grappling with student debt, a high cost of living, and a desire for flexibility and meaningful impact, prioritizing financial stability and comprehensive financial wellness from day one of their careers. For plan sponsors, attracting and retaining this emerging talent requires rethinking retirement plans and broader benefits through more personalized, technology-driven engagement that supports both immediate financial needs and long-term goals.
At PlanPILOT, we have long-espoused the necessity of customizing employee benefits to fit the ever-changing demographics of a company’s workforce. The emergence of Gen Z illustrates why this approach is necessary to maintain a productive and supportive environment for employees.
Understand the Gen Z Financial Landscape
Gen Zers are pragmatic and often financially conservative, largely due to watching their parents struggle with financial crises and entering the workforce during economic turbulence. They face significant challenges, including:
- Student loan debt: Many enter the workforce with substantial debt, hindering their ability to save for retirement or emergencies.
- Cost-of-living pressures: High inflation and housing costs make living paycheck to paycheck a reality for many, with 28% reporting this status.
- Anxiety about the future: A significant number of Gen Zers worry they won’t be able to achieve milestones like homeownership or retire comfortably, with 60% claiming their needs are not being met. Many have been struggling to purchase their first home and have low confidence that Social Security will provide them any meaningful income in retirement.
To support them, plan sponsors must move beyond traditional retirement education to offer holistic financial wellness, including budgeting tools, emergency savings assistance, and debt management resources.
Modernize Retirement Plans: Automation and Flexibility
Gen Z is open to saving for their own retirement, but the program needs to be convenient and relevant to their lifestyle and communication tendencies, including:
- Automated solutions: Implementing automatic enrollment and automatic escalation helps overcome inertia, with past studies showing 88% of Gen Zers who were auto-enrolled started saving earlier, at least 6% of their pay.
- Roth options: Providing a Roth contribution option is crucial, as many young workers are currently in lower tax brackets and prefer tax-free income in retirement.
- Portability: Given their propensity to change jobs, ensuring retirement accounts are easily portable is a key attractor.
- Student loan support: Leveraging SECURE Act 2.0, sponsors can offer matching contributions to a 401(k) based on an employee’s student loan payments, a benefit highly valued by this demographic.
Digital-First Communication
As true digital natives, Gen Z expects communication that works on mobile devices and is as seamless as their daily social media use.
- Gamification: Turn retirement planning into a game, with badges or rewards for reaching milestones like setting up an account or completing financial education modules.
- Bite-sized content: Replace long, jargon-heavy documents with short videos, infographics, and interactive apps that provide instant, personalized insights.
- Peer influence and social media: Leverage social media platforms to deliver tips and highlight testimonials from peers, as 85% of Gen Z value peer-based recommendations.
Holistic Well-being: Beyond the 401(k)
To be effective, employee benefit programs should evolve with generational changes. Traditional benefit programs that your parents knew won’t work here. Gen Z views mental health, physical health, and financial health as interconnected. To engage them, plan sponsors should consider integrating these areas:
- Mental health support: Offering access to teletherapy, mental health apps, and dedicated “mental health days” is essential, as this generation is proactive in seeking support, especially among their peers and like-age professionals who understand their unique challenges and needs.
- Financial literacy: Offer education on basic finance topics like investing basics, budgeting, and building credit.
Create a Supportive Culture
The support structure extends beyond financial tools to workplace culture.
- Flexibility and work-life balance: Remote/hybrid work and flexible hours are non-negotiable for many, and these arrangements support their overall well-being. Gen Zers are more willing to walk away from employment opportunities that don’t support these lifestyle needs.
- Purpose-driven work: Gen Z wants to work for companies that make a positive impact. Connecting their role to the company’s broader mission and community involvement fosters engagement.
- Mentorship and growth: With 94% of Gen Z employees citing career growth as important, mentorship programs and clear paths for advancement are critical for retention.
What This Means for Plan Sponsors
Supporting Gen Z’s entry into the workforce requires plan sponsors to act as partners in their overall financial journey. By providing personalized, tech-enabled, and flexible benefits—paired with a strong focus on mental health and financial education—employers can not only attract top Gen Z talent but also help them build a stable and prosperous future.
Maintaining a robust and effective employee benefit program is a continuous process, not a one-time event. With regular attention and review of their plan and whether it is meeting the expectations and needs of their workforce, plan sponsors can provide a high-quality benefit program to their employees that will improve morale, increase productivity, and reduce employee attrition. Seeking guidance from an experienced plan consultant can help plan sponsors navigate through these challenges and implement meaningful updates as needed.
Does Your Plan Support the Growing Gen Z Workforce?
At PlanPILOT, we’re creating the standard for client experience. Independent and impartial by design, we apply our skill to each facet of plan development, governance, and implementation to help you enjoy meaningful results. Our client partnerships are built on trust, communication, and responsibility—cornerstones of a healthy, prosperous relationship. We’re committed to providing objective guidance, informed innovation, and an integrated approach tailored to your unique objectives.
Our team of seasoned professionals upholds the highest professional standards, so every strategy we recommend aims to support both your organization and the participants who depend on it.
Reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.
About Mark
Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.