Inflation and a weakening jobs market in recent months have made it harder for Americans to save and make ends meet.
A recent report on employee financial wellness from Payroll Integrations found that nearly 46% of Generation Z workers have used some of their retirement savings just to get by, compared with 31% for millennials.
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The crucial part of the data was that young adults are using their retirement savings not for luxuries or travel, but to handle basic financial needs. About 42% of the total Generation Z withdrawals were used to pay off debt, while 37% went to unexpected emergencies such as car or home repairs. In comparison, 6% of millennials used their retirement savings for debt repayments.
About 9% of young workers used their retirement savings to manage rising living costs.
A separate report from real estate technology company Redfin earlier this year showed that about 70% of Generation Z and millennials struggle to pay rent, leading them to take fewer vacations, postpone doctor's visits, and cut back on eating out.
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The Payroll Integrations study showed that one in three employees was planning to use their retirement savings next year for emergencies and regular use. The report said that for young adults, retirement accounts are becoming a "last resort" amid increasing financial pressures.
The report highlighted that Generation Z’s use of retirement funds stems not from a lack of discipline, but from financial insecurity.
"Workers are encountering expenses or debt loads they can't handle with regular income or savings, so they resort to raiding retirement funds, potentially incurring penalties or losses just to stay afloat," the report said.
Another study by Bank of America earlier this year showed that about 64% of Generation Z is taking steps to improve their financial situation amid growing fiscal pressures, such as cutting back on expenses.
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