The retirement landscape is rapidly evolving with significant changes in the workforce. According to the PwC, Gen Z comprises 38% of the global workforce and will reach 58% by 2030.

The diverse, tech-savvy, and socially conscious generation is changing the dynamics of the retirement industry. With an emphasis on convenience and transparency, they demand more personalized and technology-driven options for their retirement planning.

Their growing impact makes them a crucial demographic for 401(k) plan administrators and recordkeepers to consider. To cater effectively to Gen Z’s unique expectations and needs, embracing modern technology and a forward-thinking mindset is more important now than ever.

The retirement landscape: A Gen Z workforce

As the youngest working generation, Gen Z is beginning its journey toward retirement. Employers and 401(k) plan administrators must acknowledge and adapt to their evolving needs, which differ significantly from the needs of previous generations.

Gen Z workers have specific expectations when it comes to their retirement plans and investments, such as transparency, low fees, 24/7 access to expert advice, and digital tools that make managing their finances easy. Gen Z also values the ability to make decisions in real-time and customize their portfolio according to risk level. Finally, they value having a trusted financial advisor who can provide personalized guidance.

These priorities, compounded by the challenges posed by the current economic climate, make it more important for 401(k) plan administrators to create attractive retirement savings strategies tailored to the new workforce. According to a 2022 Employee Benefit Research Institute (EBRI) report, workers aged 20-29 represent 14% of the total 401(k) plan participants. This indicates the potential to increase Gen Z’s participation in such plans.

Catering to Gen Z’s evolving needs

To effectively engage Gen Z employees and increase their participation in 401(k) plans, plan administrators must adapt their approach. A few key strategies include:

1. Financial Education

Gen Z employees are eager to learn and take control of their finances. According to Debbie Carlson’s publication in Plan Sponsor, financial education for Gen Z is not limited to retirement savings. It involves step-by-step guidance on setting financial goals and achieving them. Implementing robust financial education programs tailored to Gen Z’s understanding of personal finance themes, such as budgeting, debt reduction, and investing, can help encourage their involvement in retirement plans.

2. Harnessing the power of technology

Gen Z is the first truly digital-native generation expecting seamless and intuitive online experiences. They prefer to have real-time access to information at their fingertips. To meet their expectations, 401(k) plan administrators should focus on leveraging technology to deliver user-centric experiences. Deploying easy-to-use mobile apps, real-time account updates, and personalized resources helps to engage them better. Using online tools to compare investment options and simulate retirement scenarios can enable Gen Z employees to make more informed decisions about their 401(k) plans.

3. Offering plans with lower fees

Gen Z is highly budget-conscious and needs value for the money spent on any service or product they purchase. Plan administrators should strive to offer as much value as possible while meeting high-quality standards. By offering lower-cost plans that provide competitive returns, plan administrators can help ensure that Gen Z employees get the most out of their 401(k) investments over time.

4. Encouraging automated savings

Automated savings can help Gen Z employees stay on track with their retirement goals. Plan administrators should consider offering automated savings features, such as automatic enrollment and periodic increases in contributions, to encourage Gen Z employees to save more for their future. Additionally, plan administrators should offer incentives to reward participating employees for regularly saving and investing.

5. Incorporating environmental, social, and governance (ESG) investments

Its social consciousness characterizes Gen Z and its desire to invest in companies committed to environmental, social, and governance (ESG) issues. Plan administrators should incorporate ESG investment options in their 401(k) plan offerings. It will appeal to Gen Z’s values and interest in aligning their investments with their principles.

The need to look beyond legacy systems

Legacy systems pose a significant hurdle in meeting the demands of a Gen Z workforce. Outdated platforms and processes can hinder efficient 401(k) plan administration. They result in higher costs, compliance concerns, cybersecurity risks, lower participation rates, and client dissatisfaction.

Modernizing 401(k) plan administration is crucial to adapt to Gen Z’s needs. It includes embracing digital solutions such as artificial intelligence (AI), machine learning, and cloud-based infrastructure to increase efficiency, improve decision-making, and enhance overall user experience.

Congruent Solution’s CORE Suite of solutions is designed to meet the Gen Z workforce’s needs effectively. Our retirement plan administration software enables recordkeepers and plan administrators to deliver cost-effective, personalized, and technology-driven services.

Connect with our team now to learn about the benefits of embracing modern technologies.