There’s a new trend among employees called “super saving.” Super savers put at least 20% of their salary into a retirement or other investment account. While super savers come in all ages and income levels, the trend is especially popular with Gen Z—those aged 19-24.
Gen Z doesn’t seem to mind how much they make. Almost half of the super savers make $35k or less. The movement is more about lifestyle and habits. Workers are learning to value living on less and not overburdening themselves financially, so they can prioritize their futures.
You can encourage super saving
Workplace retirement plans are often the first introduction employees have to investing. It’s where they get their feet wet, and where they learn how investing works and how to understand the lingo. In fact, about half of Gen Z workers report that they started saving for retirement with their first job.
Which means that employers have a huge opportunity to encourage workers to become savers, even super savers, by offering a good 401(k) plan and helping them begin using it.
If your business could benefit from the addition of Gen Z employees, you might consider tailoring your plan to meet their needs. Even small businesses can offer really excellent benefits, allowing them to compete with larger companies for top talent. Before going after these big (but young) fish, try these plan design updates.
Update 1: Start or increase an employer match
It’s true that matching funds are an expense, but keep in mind that it is one of the less expensive ways to compensate employees. Since retirement benefit expenses are tax deductible, and not subject to payroll taxes, the effect on your bottom line can be substantially less than you may anticipate.
And, since an employer match helps workers maximize their retirement savings, many will prefer increased benefits to a raise.
Update 2: Provide immediate eligibility and vesting
Allowing new employees to take advantage of benefits on day one shows that you have faith in them—and in your own ability to give them a good career experience.
Many of your competitors will offer 1-year eligibility requirements, and 3-4 year vesting schedules. Design your 401(k) plan to offer immediate eligibility (or 90 days if you’re worried), as well as immediate vesting, and your company will look a lot more attractive to prospective employees.
Update 3: Use automatic plan design features
Automatic enrollment assumes every employee will participate in the plan, but allows them to opt out if they don’t want to use it. Automatic increases will adjust the amount participants contribute, usually by 1% per year up to a predetermined maximum.
Many employees will appreciate how successful their savings can be while they are completely hands-off. And some will choose to remain in a plan that they are already enrolled in because it’s the easy path.
These small design features can nudge workers into a path of excellent retirement saving.
Update 4: Offer financial wellness tools and education
Employees are increasingly asking for financial education and investment advice, and looking to employers to provide it. And those who are serious about retirement planning—the super savers—will appreciate it even more.
A few 401(k) providers offer financial education and tools. Ask what perks are available before you purchase a plan.
Update 5: Offer a larger selection of investment options
401GO offers an investment lineup that is more robust than many of our competitors. With share classes from different providers and three sets of target date funds, employees are sure to find investments that suit them.
And, with our custom portfolio builder, participants can get investment suggestions based on their risk tolerance and time to retirement, so they won’t be alone in their decision-making process.
Advice for super savers
If you have super savers—or prospective super savers—on your team, you can help them by offering these pro tips.
- Max out your 401(k). The contribution limit for 2023 is $22,500. If you can afford to, try to reach that maximum limit.
- Use multiple investment vehicles. A 401(k) is an excellent way to save for retirement, but super savers might pair that with an IRA, HSA or regular stock investing account.
- Watch fees like a hawk. Never overpay for investments. Make sure you watch your fees and if they get high, swap that investment for a similar lower-priced alternative.
- Hire a financial advisor. Advisors can improve outcomes by 15% or more over time, so it’s worth having one on your side. Just make sure you do your homework, and only hire the best.
The best retirement plan for small companies
Maybe we’re biased, but we think the 401GO platform is the best solution for small businesses. With a robust investment lineup, a custom portfolio builder, very competitive pricing, and automated management, there is no provider better equipped to make your company attractive to Gen Z employees.