Gen Z leads in retirement readiness due to better DC plan design

Employees can't save enough for retirement on their own, and workplace plans are becoming a critical vehicle for getting them anywhere close to the financial finish line. 

Only 42% of Americans are currently on track to achieve retirement security, according to the newly released Vanguard Retirement Outlook, but workers with access to a defined contribution plan plan are twice as likely to reach their retirement savings goals compared to those without. Expanding plan access to all workers could increase overall retirement readiness by 19 percentage points, and extending the average working age by two years — to 67 — could add another 13 points.

"Expanding access to defined-contribution plans and improving plan design has dramatically improved retirement outcomes," Fiona Greig, global head of investor research and policy at Vanguard, said in a release. Features like auto-enrollment and higher default savings rates are major contributors to retirement success, she said. 

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According to the Employee Benefit Research Institute, 45% of private-sector employers offer at least one defined contribution retirement plan to their employees. For HR and benefits leaders, the data underscores the power of plan design in driving savings behavior — especially among younger generations. Vanguard's analysis shows 47% of Gen Z and 42% of millennials are on track for retirement, outpacing baby boomers and Gen X due to broader DC plan participation and stronger defaults. However, student debt continues to erode progress: Millennials' debt burden, which averages a quarter of their income, reduces their retirement readiness by nine percentage points.

Older workers remain more financially strained: Fewer than 40% of Gen X and baby boomers are on track for retirement. Median-income boomers can expect to replace 56% of their pre-retirement income, leaving a $9,000 annual spending gap, while Gen Xers face a smaller $6,000 shortfall.

To help close these gaps, Vanguard points to several levers: Expanding access to DC plans, encouraging longer workforce participation and tapping home equity later in life. For employers, the findings offer both a challenge and an opportunity, to continue to evolve plan design and access to benefits that help employees retire with confidence.

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"Retirement readiness isn't just about saving — it's about having the right tools, support, and access throughout a worker's career," said Kelly Hahn, Vanguard's head of retirement Research. "Retirement security is a shared responsibility — policymakers, employers, and individuals all have a role to play."