If you’re reading this and you were born after 1996, you’re probably a member of Generation Z—the youngest employees in today’s workforce. You’re part of the most diverse generation, and studies show you prefer spending money on experiences over stuff—using rideshares and bikeshares instead of buying your own wheels, for example.^1,2 You’re the first digital natives, growing up with the internet and smartphones. As the youngest employees in today’s workforce, you might have a preference for remote or hybrid work and setting your own work hours.

Over the past three years, Gen Z participation in workplace retirement plans like 401(k)s has more than doubled. That fast growth is expected to continue, as Gen Z is expected to make up 30 percent of the workforce by 2030. However, our data reveals that many may be leaving money on the table: only 62 percent are contributing enough to maximize their employer’s matching contributions—the lowest of all age cohorts.³

You might think of retirement planning as “spending” on the ultimate experience: your future. So whether you’re already off to the races with your retirement plan, or you’re just starting out, here are five tips to navigate retirement planning, and build your net worth.

1. Start saving early

You’ve probably heard about the power of compounding—basically another term for the snowball effect. When you invest cash—say, in mutual funds comprised of stocks or bonds—you have the potential to make money from interest, dividends and the rising value of holdings in your portfolio. Where it gets interesting is what happens next: Any profit you’ve made gets reinvested and can potentially make even more money. Over time, that snowball rolling down the hill toward your retirement can get really big. That’s why it’s generally a good idea to start saving early – so your nest egg has more time to grow.

The power of compounding is significant in tax-advantaged retirement plans, because the compounding happens on cash that you might have otherwise paid to Uncle Sam. (Contributions to Roth plans aren’t pre-tax, but you don’t have to pay taxes on earnings in Roth plans, as long as you take them after age 59½ and the account has been open for at least five years.)

One way to get this tax advantage is to sign up for your company’s retirement plan. Around 88 percent of Gen Zers eligible for company plans have already done so—more than any previous generation.³

FOR ILLUSTRATIVE PURPOSES ONLY. This is a hypothetical illustration to show the value of saving early; it is not intended as a projection or prediction of future investment results, nor is it intended as financial planning or investment advice. It assumes a 6% average annual rate of return, $75,000 starting salary with no increases invested over 40 years and 33 years. Rates of return may vary. This illustration does not include any charges, expenses or fees that may be associated with your program. Fees could change the outcomes provided.

2. Meet your employer match

Tax-free compounding might not be the only gift you get with retirement planning. Many employers will also match a percentage of your retirement contributions. Yes, they’ll add to your retirement savings—but only if you sign up and contribute.

Try to take advantage of this benefit, because matching contributions can add up fast.

FOR ILLUSTRATIVE PURPOSES ONLY. This is a hypothetical illustration to show the value of meeting your employer match; it is not intended as a projection or prediction of future investment results, nor is it intended as financial planning or investment advice. It assumes a 6% average annual rate of return, $75,000 starting salary with no increases invested over 40 years. Rates of return may vary. This illustration does not include any charges, expenses or fees that may be associated with your program. Fees could change the outcomes provided.

3. Save as much as you can

While Gen Z has been fast to sign up for retirement plans, they’re saving 5.9 percent of their income, on average, according to our records. That’s less than any other generation.³

It’s important to remember however that this age group could be facing a lot of challenges when it comes to saving. Young entry-level workers are often at the bottom of the pay scale, with 61 percent reporting a household income of $50,000 or less, according to a recent study by Credit Karma.⁴ And with rent, grocery and utility costs rising, younger workers may be feeling the pinch.

But even though it can be hard to save when you’re just starting out, it’s important to stash away as much as you can. Over time, the difference in saving 10 percent rather than 5 percent is dramatic.

FOR ILLUSTRATIVE PURPOSES ONLY. This is a hypothetical illustration to show the value of an increase in contributions; it is not intended as a projection or prediction of future investment results, nor is it intended as financial planning or investment advice. It assumes a 6% average annual rate of return, $75,000 starting salary with no increases invested over 40 years. Rates of return may vary. This illustration does not include any charges, expenses or fees that may be associated with your program. Fees could change the outcomes provided.

4. Look into student loan matching payments

Student loan debt is a big savings hurdle for many people just beginning their careers. While federal loans have been paused since the pandemic, they are expected to restart later in 2023. Either way, for many people, loan payments will continue to loom large in their budgets. Fortunately, a provision of the SECURE 2.0 Act gives companies the option to match your student loan payments as a contribution to your retirement account.

This new law has the potential to help your retirement savings, even while you’re chipping away at loan payments. Ask your employer if they are matching student loan payments in the plan. (Or ask about this benefit when interviewing for new jobs).

5. Know what to do with your retirement plan when you change jobs

It used to be common for people to stick with their first employer until they retired. These days that’s rare. Workers are increasingly mobile, especially young workers, so when changing jobs you need to consider what happens to your retirement plan.

As long as you’re fully vested, the money you’ve saved and the investment income you’ve earned will continue to be yours—including any company matches. The question is what to do with it. Think twice before opting to close the account and withdraw your funds. In most cases you’ll owe taxes and may have to pay early-withdrawal penalties.

If you don’t take any action, your funds will stay in the account and any growth will continue to be tax-deferred—although some companies will make you close the account if the balance is small.

Another option is to do a “rollover” or move your funds into a tax-advantaged individual retirement account (IRA) or into the new plan at your new company. That way you won’t lose tax benefits and your retirement savings will all be in one place. Just be sure you understand the investment options (and fees) associated with the IRA or your new employer plan, as these can differ considerably from plan to plan.

You are urged to consider all your options and their features and fees before moving money between accounts.

You can’t play if you don’t show up

If you only take one thing away from this article, make it this: If your company has a retirement plan, sign up for it. Most workers find they barely notice the pre-tax deduction from their paycheck. Meanwhile, their future financial nest egg can keep snowballing.