For Gen Z, saving for vacation tops retirement: JPM study

An astonishing number of Gen Zers aged 18 to 29 are opting to save for a vacation rather than for retirement.

Nearly half of Gen Z folks are prioritizing vacations over their retirement savings, the highest of any age cohort, according to a new report from JPMorgan Asset Management.

Paying off student loans and cobbling together emergency funds are also far more important to them than saving for their future golden years.

“This may be due to limited understanding of the benefits of starting early (especially compounding) and more immediate financial pressures — debt feels urgent, and retirement can seem distant, making it easier to defer saving,” Alyson Frost, head of retirement insights at JPMorgan Asset Management, told Yahoo Finance.

In January, the firm conducted online surveys with more than 2000 people who had contributed to their defined contribution retirement plans.

But before we shame these younger workers, know this problem runs deep for people of all ages.

A majority of those surveyed aren’t kicking in as much as they should to their employer-provided retirement plans and know they should be doing more, according to the research.

When forced to make trade-offs between retirement savings and other goals, more than half of workers of all ages put building emergency savings over saving for retirement.

Roughly 3 in 10 place a higher priority on paying off education debt or general debt, while a similar share save for vacations more than for their golden years, the researchers found.

And 1 in 10 say higher living expenses have led to reduced retirement contributions — or none at all.

“This reflects both an intention gap and real-world constraints,” Frost said. “Higher prices and inflation appear to be creating a real ‘budget squeeze’ effect that is spilling over from day‑to‑day spending into retirement behavior.”

Two young women traveling on backpacking Interrail trip through Europe, arriving and spending time in France. Part of a series with stills · Counter via Getty Images

Retirement account leakage ‘remains high’

Not investing in your retirement account is troubling, but withdrawing money from it is potentially worse.

“Plan leakage remains high: 1 in 4 have taken a loan and/or early withdrawal, with another 19% planning to do so,” Frost said.

“The persistence of loans/early withdrawals suggests many participants are using their retirement plan as a source of short-term liquidity, which can erode long-term outcomes.”

The primary reason people are tapping their retirement savings is to cover unexpected expenses, followed by a home purchase, reducing credit card debt, helping a family member, and healthcare costs.

The million-dollar calculation

When you ask someone how much they think they need to have saved in order to retire comfortably, inevitably, they guess and say at least $1 million.

So it’s not shocking that the researchers detected a notable lack of saving know-how.

More than half do not know how much they need to save each year to retire securely or how to estimate the future value of their retirement savings at their current contribution rates.

And nearly two-thirds of those who do save, up from roughly half a decade ago, wish they could ‘push an easy button’ and fully delegate planning and investing to a financial professional.

So, how are these retirement savers choosing how much to contribute to their retirement plans? One-quarter say they contribute as much as they can afford, while 22% contribute what their employer will match. Another 17% believe they are contributing the legal maximum.

Only a fraction, 11%, base contributions on how much they believe they need to save, and 10% rely on their starting contribution rate, plus any automatic escalation that may have occurred.

“When many participants don’t know how much they need to save, and some are reducing/stopping contributions due to higher prices, it reinforces how uncertainty and household budget strain can directly disrupt retirement progress,” Frost said.

Guidelines for retirement savings

Here’s a suggestion for getting ahead on the “How much do I need?” question. Plan to have socked away at least 1 times your salary by the time you hit age 30, 3 times by 40, 6 times by 50, 8 times by 60, and 10 times by 67.

Retirement is personal, of course, and what you will wind up needing is going to depend on a range of factors, from your age at retirement and your health to inflation.

Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.

As for how much you should save each year, most people should target a total contribution rate of 12% to 15%, including both employee and employer contributions.

All this would be easier to swallow if people understood how many years their retirement funds are likely to be helping support their daily living costs.

When asked when they expect to retire from their primary career, nearly 3 in 10 said before age 65, about a quarter plan to exit the workforce at age 65, and 33% expect to work until age 66 or older, according to the report. More than 40% of Gen Z hope to retire before 65, and two-thirds expect to retire before 60.

These crystal balls are in sharp contrast to today’s reality. Among current retirees, nearly 7 in 10 retired before age 65 and 3 in 10 before age 60, according to this research.

Retirement experts have noted that people often stop work before they expect to for some time now. Even the best intentions get waylaid by the things you can’t control, from a health issue to a job loss, or the need to care full-time for an aging relative.

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “Retirement Bites: A Gen X Guide to Securing Your Financial Future,” “In Control at 50+: How to Succeed in the New World of Work,” and “Never Too Old to Get Rich.” Follow her on Bluesky and X. You can reach her at kerry.hannon@yahooinc.com

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