Gen Z, often stereotyped as careless spenders, is facing stark financial realities that contradict the narrative. Nearly half of young adults have already tapped into their retirement savings, not for luxury purchases, but to pay down debt and cover emergencies. Many are skipping meals, delaying medical care, and selling belongings just to make rent. Despite being the most active contributors to 401(k) plans, they are caught between long-term financial responsibility and immediate survival.
Retirement Withdrawals Driven by Debt
A new report from Payroll Integrations’ 2025 Employee Financial Wellness study found that 38% of employees overall have withdrawn money from retirement accounts. Among Gen Z, the figure climbs to nearly 50%, compared to 31% of millennials and 41% for both boomers and Gen X. For Gen Z, the primary reason was debt repayment, with 42% using early withdrawals to manage debt, compared to just 6% of millennials, 17% of Gen X, and none of boomers. While other generations primarily dipped into savings for emergencies, Gen Z is turning to retirement funds to stay afloat financially.
Struggling to Meet Basic Needs
Beyond retirement accounts, young adults are also cutting back on essentials. A Redfin survey shows 22% of Gen Z renters have skipped meals to make rent, while another 22% have sold personal belongings. Nearly one in five (19%) have postponed medical treatment. These trade-offs underscore how housing costs and stagnant wages are forcing young workers to compromise their health and stability just to cover monthly expenses.
Debt Burden and Rising Costs
Student loans and credit card debt weigh heavily on Gen Z. Empower reports that they pay an average of $526 per month on student loans—almost double the $284 average across all generations. Newsweek data shows Gen Z carries over $94,000 in personal debt, far higher than millennials ($60,000) and Gen X ($53,000). Inflation and soaring housing costs add pressure, with Zillow noting that homebuyers now need to earn 80% more than in 2020, even as median income has risen only 23%. Many Gen Zers rely on credit cards to cover everyday expenses, leading to average balances of $3,262 and mounting interest payments.
Conclusion
Far from frivolous spenders, Gen Z is financially strained, juggling heavy debt, rising living costs, and the pressures of adulthood. Their early withdrawals from retirement accounts highlight a generation forced to prioritize immediate survival over long-term security. Without meaningful relief on housing, student loans, and wages, the cycle of debt and sacrifice will continue to shape their financial future.
