The Best Types of Retirement Accounts for Gen Z To Open in 2025
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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Retirement planning looks a lot different for Gen Zers than it does their elder peers, such as boomers or Gen Xers.
Since Gen Z employees are young enough to have a longer time horizon, they may be in a better position to open certain retirement accounts that an older adult would not get the same benefit from today.
Here retirement and finance experts explained the best types of retirement accounts for Gen Zers to open, and some considerations for their retirement planning.
Young Investors Should Make the Most of Time
Time is one of the most powerful tools that Gen Zers have in their pockets when it comes to retirement savings, according to Michael Boggiano, managing partner at Wealthcare Financial.
Starting to save for retirement in their 20s means they can take full advantage of the magic of compound interest, for one, he said. “For example, a 22-year-old who invests $6,500 in a Roth IRA annually could turn that into over $2.3 million by age 65, assuming a conservative 7% annual return.”
Even just waiting a few years to start investing in these accounts can cost hundreds of thousands in potential growth down the road, he warned. “The earlier you start, the less you need to contribute each year to achieve the same results.”
Another way of putting this is to think in terms of “the Rule of 72, which says that if your investments earn approximately 7% annually, the value will double every 10 years,” according to Laura Adams, an award-winning personal finance author and expert with Finder.com.
“That means young investors have plenty of time to turn consistent, small investments into a large amount of wealth,” Adams said.
Roth IRA
Once Gen Z has a cash cushion, the best account to use is a tax-advantaged Roth IRA, both Adams and Boggiano suggested.
“The tax-free growth and withdrawals in retirement make it ideal for young investors who are currently in a lower tax bracket,” Boggiano said. Contributions to a Roth IRA are made with after-tax dollars, so you’re locking in today’s lower tax rates.
Additionally, IRAs are not off limits if you’re self-employed. You can still contribute to a Roth IRA when you have earned income that doesn’t exceed an annual limit, Adams pointed out.
Employer-Sponsored 401(k)
Employer-sponsored plans like a 401(k) should also be on a Gen Zer’s radar, especially if their company offers a match, Boggiano insisted.
“This is essentially free money and a guaranteed return on their contributions. Any Gen Zers who aren’t taking advantage of an employer’s 401(k) match are losing out on way more than they think,” Boggiano said.
FDIC-Insured Emergency Savings Account
While not a traditional retirement account, Gen Zers should also have FDIC-insured emergency savings to get through a prolonged financial hardship like losing your job or business income, as well, Adams said. “Having a cash reserve is essential for your financial health and security,” she said.
Gen Zers should always keep their emergency money in a high-yield savings account to earn as much interest as possible, she added.
Traditional IRAs and HSAs Later in Life
Later in life, as their incomes grow and tax brackets shift, Gen Zers can consider traditional IRAs, which offer upfront tax deductions, Boggiano said.
“Additionally, a health savings account (HSA) is a fantastic tool for saving pretax dollars, which can be used for medical expenses now or in retirement,” he said.
Order of Savings
In terms of how to prioritize savings in these accounts, Boggiano offered the following order: Most Gen Zers should prioritize an employer 401(k) match. Once that’s maxed out, a Roth IRA should come next, followed by contributing additional funds to the 401(k) up to its limit.
“Having a mix of tax-advantaged accounts ensures flexibility in retirement. It’s also worth maintaining an emergency savings fund with at least three to six months’ worth of expenses to avoid using retirement savings prematurely and ultimately taking a large tax penalty,” Boggiano said.
How Much Should They Contribute?
While the ideal contribution varies by income, Gen Z should aim to save at least 15% of their gross income for retirement, which can include both personal contributions and employer matches, as well, Boggiano said.
Starting with smaller, manageable percentages and gradually increasing contributions with raises or bonuses is an excellent strategy. He pointed out that the 2025 contribution limit for Roth IRAs is $7,000, and 401(k) plans allow up to $23,500 annually for those under 50.
“Maxing out these limits isn’t feasible for everyone, but contributing consistently over time is key,” Boggiano said. Additionally, he recommended automating contributions “because of the ‘out of sight, out of mind’ nature of the investment.”
Retirement Planning Is a Marathon, Not a Sprint
The younger you are, the easier it is to retire as a millionaire or multimillionaire, Adams said. Gen Zers are in the perfect position to leverage time to their advantages.
“Balancing short-term financial goals with long-term savings doesn’t have to be overwhelming,” Boggiano added. “Start small, automate contributions, and revisit your plan annually as your career and income evolve. Taking incremental steps now can lead to tremendous financial freedom later in life.”
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