#Retirement Weekly: Young workers wonder: ‘When should I start saving for retirement?’

If this sounds like you, you may have questions about where to start getting a better handle on your 401(k). Even if you are wearing skinny jeans while you read this, I still encourage you to read on. You may not be Gen Z, but many of these considerations are important for anyone who wants their 401(k) to support their retirement goals.

How much should I contribute?

Competing financial priorities sometimes make it difficult for workers to prioritize their 401(k). Credit card debt, student loans and emergency savings might seem more urgent than saving for retirement when you’re young. However, Gen Z is up to the challenge of multitasking. We found that nearly half of Gen Z respondents (47%) want to increase their 401(k) contributions.

It’s a smart move to start early. Saving a piece of your paycheck in your 20s may help you avoid the need to make bigger contributions to your 401(k) later on, when you may face even more financial responsibilities, such as a mortgage and child care. A contribution rate of 10 – 15% is a great goal, even if you can’t reach it out of the gate. As your income increases, consider upping your savings rate. Just 1 or 2 percentage points each year can make a big difference over time.

Read: Money Milestones: This is how your finances should look in your 20s

Where should I be invested?

Most 401(k) plans offer a range of investment choices. Without guidance, trying to select the right ones can feel overwhelming. Half of Gen Z participants in our survey say they don’t know what investments to choose to have enough to retire. At this stage, workers of all ages can get stuck. If you are feeling “analysis paralysis,” a little psychology may help.

The paralysis may stem from anxiety about making the wrong decision, so consider a few steps to overcome it. First, recognize your feelings of anxiety. Then, try to gain perspective on the problem. You can feel assured that it is much more important for young workers to set up regular contributions to their retirement account than it is to choose the “perfect” investments. If you are decades away from retirement, you have leeway to explore different types of investments and time to recover from market volatility like we’ve seen during the pandemic.

Another potential stumbling block for Gen Z is a lack of retirement investment options that reflect their values. Gen Z is more interested than older generations in exploring environmental, social and governance (ESG) investments, according to our research. If that sounds like you and these options aren’t available through your plan, check if your plan also offers a self-directed brokerage account, which could give you access to a wider range of investments to help further tailor your portfolio.

Read: Ethical investing is much easier than you think: 4 ways to fund your retirement and minimize harm to humanity

How can I stay on top of my 401(k)?

There are a lot of ways you can help yourself with retirement planning. For example, online savings calculators are widely available, typically right on your 401(k) website. You can use one to set a retirement goal and determine whether you are on track. Then, add a simple, repeating reminder to your to-do list or calendar. Make a quarterly appointment to check back with your 401(k).

Despite the tools available, our survey found that 31% of Gen Z participants struggle to stay on top of their 401(k). This might sound discouraging, but it’s really not. Gen Z may lack confidence about their 401(k)s, but they are remarkably self-aware and eager to learn. Almost two thirds of Gen Z participants say their financial situation warrants advice from a professional, and they’re willing to follow a mix of computer-generated (33%) and human advice (60%) to address their concerns.

Spending some time with the many retirement resources available and seeking professional advice can help Gen Zers (and all of us!) build financial confidence, literacy and healthy habits.

The main takeaway is simple: the best way to invest for retirement is just to start.

Catherine Golladay is managing director and head of Schwab Workplace Financial Services.

The information contained herein is proprietary to Schwab Retirement Plan Services Inc. (SRPS) and is for informational purposes only. None of the information constitutes a recommendation by SRPS. The information is not intended to provide tax, legal, or investment advice; please consult with your accountant or investment adviser for how this applies to your specific situation. SRPS does not guarantee the suitability or potential value of any particular investment or information source. Certain information provided herein may be subject to change. None of the information contained herein may be copied, assigned, transferred, disclosed, or utilized without the express written approval of SRPS and its affiliates.

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