GEN Z IS DITCHING PENSIONS—WHAT THEY'RE DOING INSTEAD

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Gen Zers are ditching traditional pensions for flexibility, financial control, and experiences over late-life savings.

Gone are the days where young people worked to frantically amass huge pension wealth to enjoy later down the line—at least for Generation Zers, who seem more interested in enjoying their savings now and less trusting of the social security systems in place to safeguard them later on.

For those born between 1997 and 2012, traditional retirement is no longer the north star of financial planning. Instead, flexible work, freelancing, accessible investments, and real-time financial control are adapting their approach. Experts say the current economic landscape, which looks nothing like that of their parents', is what has really driven young workers away from pensions.

Data from the Institute and Faculty of Actuaries in the U.K. found that 46 percent of Gen Z respondents believe the state pension will not exist by the time they retire. That deep skepticism is echoed in the U.S., where most young Americans fear social security will be depleted before they ever see a cent.

"It is less about Gen Z 'walking away' from pensions than traditional defined benefit pensions largely vanishing from the private sector, with only about 15 percent of private employers still offering them," Steven Rogé, chief investment officer at R.W. Rogé & Company, Inc, told Newsweek. "Most Gen Z workers aren't rejecting pensions—they're entering a job market where pensions simply don't exist as an option.

"It's like asking why young people don't use payphones when the infrastructure was ripped out before they ever had the chance," Rogé said.

The economic future Gen Zers are preparing for is unlike anything previous generations faced.

A 2025 analysis from Rathbones Group estimates that today’s 25-year-olds in the U.K. will need £3.1 million [$4.1 million] to retire comfortably at age 65, driven in part by the long-term erosion of inflation. Yet a full retirement at 65 looks increasingly unrealistic to them: 47 percent of Gen Zers say they do not expect to retire completely.

Across the Atlantic, similar trends are emerging. Nearly half of Gen Z workers in the U.S. have already dipped into their retirement savings, according to research previewed by Payroll Integrations and Dynata. Mutual of Omaha’s recent Protection Index Report, shared with Newsweek, also found that Gen Z is significantly more likely than other generations to say they have not even started thinking seriously about long-term financial goals.

Erica Sandberg, consumer finance expert at BadCredit.org, told Newsweek that the shift away from traditional pensions is structural, not generational.

"The trend away from traditional pensions has been consistent over the years. In the past, employers would provide their workers with a pension, and retirees would receive guaranteed checks for life," Sandberg said. "But most companies now offer 401(k) plans instead.

"It’s up to the employee to fund them with their pre-tax income and manage their own investments."

Instead of lamenting the loss of stability that pensions once represented, many Gen Zers are building new, self-directed models of security. Rogé added that they are prioritizing portability and flexibility.

"Gen Z has watched millennials get burned by layoffs and corporate restructuring, so they're choosing portability over promises," he said.

"A 401(k) follows you from job to job, a pension typically doesn't."

Rogé added that younger workers are approaching retirement savings in a more time-conscious manner.

"The same time-based structure gives them a clear playbook: keep near-term money safe, invest mid-term money to beat inflation without equity-style drawdowns, and let long-term money compound in low-cost index funds." Rogé said. "That separation of timelines calms the very human biases, like loss aversion and herd effects, that otherwise tempt people to sell low or chase fads."

Abandoning Pensions for Micro Retirements

That clarity may be part of why Gen Z is contributing to 401(k) plans earlier than millennials did. Some surveys, Rogé noted, show Gen Zers may even be better prepared for retirement than Gen X—a surprising insight given their broader skepticism toward that stage of their life.

In parallel, an emerging lifestyle trend among young professionals—dubbed "micro-retirement"—is gaining traction. The new approach sees some Gen Zers choosing to take breaks between jobs to travel, pursue passion projects or simply rest. Rather than waiting until they reach their 70s for a shot at leisure, they are seizing the moment.

Iván Marchena, senior economist at Just2Trade, told Newsweek that Gen Z’s different approach is also driven by deep mistrust in existing systems.

"Traditional retirement models are quite outdated," Marchena said. "Rising living costs, student debt, and unstable housing markets mean most are focused on making ends meet now, not saving for something that's another 30 or 40 years away."

He added: "Having cash on hand or having your savings invested in something that's easily accessible like stocks is something that Gen Zers feel more secure about."

Gen Z may have been pushed to rethink traditional pensions, thanks to an evolving economic landscape, but advances in technology have encouraged them to take that path sooner.

"There are currently plenty of investment options available as an alternative to pensions that weren't as accessible in the past," Marchena said. "Thirty years ago, if you wanted to invest, buy bonds or stocks, you had to go through a tiring, lengthy processes. Today, you can practically invest in stocks, bonds and crypto in 30 minutes.

"Gen Zers prefer the latter and are left with less capital to invest into pensions," Marchena added.

Rogé agreed that Gen Z is not disengaged but discerning.

"They're more financially engaged than previous generations who could coast on autopilot pension systems," he said. "That engagement, combined with longer investment horizons and better financial and technology tools, may actually serve them better in the long run."

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