KEY TAKEAWAYS
- Many Generation Z and millennial workers have saved enough for retirement to maintain or exceed their current spending when they stop working.
- Younger generations have had more access to defined contribution plans, which allow workers to set aside a portion of their income for retirement.
- Although younger generations are better prepared for retirement, their high debt levels compared to older generations are holding them back from saving more.
With access to better retirement savings plans, younger generations are generally more prepared for a comfortable retirement than older generations.
More than four in 10 Americans are on track to save enough to continue or increase their current spending habits during retirement, according to investment management company Vanguard. In particular, Generation Z and millennials are on that track, Vanguard found.
Why This is Significant
If nothing changes, Social Security benefits will not be paid in full starting in 2034. That means younger generations may be unable to rely on this program when they retire. However, if these workers can manage to save despite their financial burdens and continue to be better prepared for retirement than previous generations, they may be able to have a comfortable retirement with only their savings.
Why Younger Generations Are More Prepared
One reason Gen Z and Millennial workers are doing better at saving for retirement is the increased accessibility to defined contribution plans such as 401(K)s.
According to Vanguard, about one in three Gen Z workers has access to a DC plan. When Baby Boomers were the same age, only one in four had access to this type of retirement savings plan. DC plans allow employees to set aside part of their pay that will grow tax-deferred until they retire, which generally makes it easier for workers to save.
Americans with a DC plan are more likely to be prepared for retirement, said Vanguard researchers. The average worker with a DC saves more, partly because workers with access to a DC often make more money. These plans also make saving easier due to features like auto-enrollment and Qualified Default Investment Alternative, which automatically place the worker’s savings into diverse investments that will provide a good return.
What Burdens Prevent Each Generation From Saving More
While younger workers are doing better at preparing for retirement, they could save even more if they were less burdened by debt.
The youngest workers, Gen Z, are struggling with their budgets. Many are unable to afford a starter home as rent costs and their debt levels continue to grow. Particularly, Gen Z and Millennials have had to take out more student loans as higher education costs have continued to rise. Approximately 30% of Millennials’ non-housing debt consisted of student loans; in comparison, student loans accounted for about 20% of Gen X debt and 10% of Baby Boomers’ debt at the same age.
As of 2022, Millennials aged 35-38 held about $12,000 in nonhousing debt, which includes student loans, auto loans, and credit card debt. Gen X held about $8,000 at the same age, and Baby Boomers held about $6,000. About a quarter of Millennials’ income goes toward paying down their debt, compared to Baby Boomers, who at the same age put only 15%.
According to a Vanguard analysis, the debt Millennials hold reduces their likelihood of achieving retirement success by approximately nine percentage points.
Gen Xers have been struggling to maintain their financial responsibilities as more of them join the “sandwich generation,” where they support both their children and parents. Members of this generation say it is harder to set money aside for retirement due to their familial financial responsibilities.
Baby Boomers experienced a shift from defined-benefit pensions to DC plans in the middle of their careers. These pension programs, which provide employees with guaranteed income after they retire, are less reliable, as the funding comes solely from companies. These plans are also less suitable for today’s workforce, which frequently changes jobs.
To maintain their current spending levels in retirement, Vanguard researchers suggest that Baby Boomers tap into their home equity. As of July 2025, home prices have increased by 50.7% over the last five years, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. This generation could sell their home in lieu of a smaller, more affordable one. However, with home prices significantly higher and mortgage rates still high, this option may not be accessible to all.
