Table of Contents

1. Key Highlights
2. Introduction
3. How widespread is the financial strain among younger workers?
4. Retirement confidence is slipping across generations
5. Why housing and mortgage dynamics are central to the squeeze
6. The new normal: supplemental work, career choices and job search priorities
7. Mental bandwidth, productivity and the long-run cost of financial stress
8. When people retire earlier than planned: causes and consequences
9. The compounding effect: deferred emergency savings, unpaid down payments and retirement shortfalls
10. Practical strategies for individuals: what to do when money is tight
11. What employers can do now
12. Policy levers that could ease the squeeze
13. Scenarios for the future: what happens if current trends persist
14. Real-world examples and case studies
15. How to prioritize: the trade-off between paying down debt, saving for emergencies and retirement
16. The role of financial education and behavioral design
17. Final assessment: the stakes and how to act now
18. FAQ

Key Highlights

• Majority of Gen Z and millennials are taking on additional work to meet basic expenses; many report that extra income is essential to make ends meet, and worry about debt or household costs impairs workplace focus.
• Retirement confidence is declining across age groups: fewer people say they are on track, and the share increasing savings has fallen sharply; younger generations are deferring emergency savings, debt reduction and retirement contributions.
• Housing costs, elevated mortgage rates, persistent inflation and job-market uncertainty from AI are crowding out savings, while employers and policymakers face mounting pressure to adapt benefits, housing policy and workforce supports.

Introduction

A Wall Street bank’s latest survey exposes a widening financial fault line under younger Americans. Gen Z and millennials increasingly rely on extra work just to cover day-to-day costs. At the same time, measurable progress toward retirement is stalling: fewer people now say they are on track for retirement than a year ago, and the share of savers boosting contributions year over year has dropped substantially. The reasons are familiar—housing costs, higher borrowing costs, lingering inflation—but the implications extend beyond short-term cash flow. When people defer building emergency savings, paying down debt and contributing to retirement accounts, they sacrifice the very foundations of financial stability. That reality will shape careers, labor markets and public policy for decades.

The evidence arrives from a recent retirement survey conducted by Goldman Sachs Asset Management. It paints a picture where earning more is the primary driver of job moves for many, additional gigs are commonplace, and mental bandwidth is eroded by economic stress. This article parses the survey’s results, places them in a broader economic context, examines real-world consequences for individuals and employers, and outlines concrete steps savers and policymakers can take to blunt the damage.

How widespread is the financial strain among younger workers?

Goldman Sachs’s findings show that taking on extra work is a mainstream strategy for coping with the present cost structure. About 61% of employees reported doing work beyond their primary jobs; the practice is especially common among younger cohorts—80% of Gen Z and 77% of millennials. For most of these younger workers, the additional earnings are not discretionary. Roughly three out of four Gen Z (76%) and millennials (73%) said they could not make ends meet without that added income.

Two consequences follow immediately. First, financial stress is not limited to weekend hustles or freelancing for extra spending money. It’s a structural response to insufficient wages relative to expenses. Second, the need to work additional hours bleeds into other parts of life: 69% of Gen Z and 67% of millennials told Goldman Sachs they find it difficult to concentrate at work because they worry about debt or household costs.

Those numbers translate into concrete realities. Imagine a 28-year-old renting in a coastal city, paying high rents, repaying student loans and covering commuting or childcare costs. Extra work becomes necessary to avoid falling behind on bills. The extra hours reduce time available for career development, networking or sleep—factors that can slow wage growth and long-term financial progress.

Retirement confidence is slipping across generations

The survey reveals a clear decline in retirement confidence. Last year, 68% of respondents said they were on track for retirement; that share fell to 58% in the latest survey. The drop is not confined to younger workers. Across income brackets and age groups, Americans report lower preparedness.

Savings momentum has weakened. The share of respondents increasing their savings year over year fell from 55% to 39%, while the number of those decreasing savings rose. Goldman Sachs frames this as “competing priorities”—housing, debt, family expenses—crowding out retirement contributions and emergency savings.

At the same time, a striking minority of retirees quit working earlier than planned: 44% said they retired sooner than expected. Among those, 45% stopped working between one and three years earlier than planned, 26% between four and five years earlier, and 14% between six and 10 years sooner. Early retirements reduce aggregate labor supply and may force others to extend work lives later to compensate.

The combination—fewer saving more slowly while a substantial portion of retirees leave the workforce prematurely—creates an underfunding risk for future retirees and a potential mismatch in labor supply for employers.

Why housing and mortgage dynamics are central to the squeeze

Housing looms large in household budgets. Goldman Sachs points directly to housing costs as a factor that “crowds out” retirement saving priorities. Two structural developments amplify the pressure.

First, house prices remain elevated in many markets. While home-price trajectories vary regionally, affordability has deteriorated in the wake of rapid price increases over the past decade. Second, mortgage rates are substantially higher than the near-zero rates of the pandemic era. That combination—higher home prices and higher financing costs—pushes monthly housing payments out of reach for many younger buyers.

For renters, elevated rents limit the ability to save. For potential buyers, the higher monthly payments required at current mortgage rates force trade-offs: save for a larger down payment, continue renting, or buy a smaller, more distant property. Each choice affects retirement pathways differently. Renting longer postpones the accumulation of housing equity that often underpins retirement security. Buying at the wrong time or taking on excessive leverage reduces the capacity to save for retirement or handle emergencies.

These pressures are more than economic abstraction. Consider a hypothetical couple in their early thirties living in a fast-growing metro area. They face the choice of staying in a cramped rental with limited savings ability or buying farther from work to afford a mortgage payment. Both paths may delay child-rearing decisions, career mobility and retirement saving.

Policy and market factors also matter. Zoning constraints and limited new housing supply in certain cities keep prices elevated. Where supply reforms or incentives encourage construction, affordability can improve. Absent such changes, housing will continue to compete with retirement for household cash flow.

The new normal: supplemental work, career choices and job search priorities

Goldman Sachs found that many employees still view work as a pathway to financial stability, but compensation is a rising factor in job mobility. About one in three respondents (34%) said earning more money would be a primary motivation for moving jobs.

A separate recruitment-platform study highlights how cost pressures reorient job searches. Gas prices, commuting costs and remote work options change how workers prioritize roles. The study found:

• 65% of prospective job movers adjusted search priorities because of gas prices.
• 23% seek roles closer to home.
• 17% emphasize higher pay to offset commuting expenses.
• 20% prioritize fully remote positions.
• 5% are specifically pursuing fully in-person roles.

Those shifts reflect a broader recalibration of the value proposition for jobs. Workers now judge roles by not just wages but total cost-of-work considerations: commuting time and expense, workplace flexibility, and benefits that offset household costs (childcare, transit stipends, rental assistance, student loan help).

Supplemental work takes many forms: gig economy platforms (rideshare, delivery), freelancing, second part-time jobs, and short-term contract work. For some, such work offers control and schedule flexibility; for others, it is a necessity. The proliferation of secondary income streams ties into another trend: the gig economy has broadened labor supply and provided alternative income sources, but it rarely replicates the benefits of full-time employment—consistent benefits, employer-sponsored retirement plans, and predictable hours.

Employers face a strategic choice. To retain talent, they increasingly need to address total compensation and non-wage benefits. Flexible schedules, remote-work options, student loan repayment assistance and enhanced retirement matching can reduce turnover and mitigate the “need to hustle” outside work hours.

Mental bandwidth, productivity and the long-run cost of financial stress

Financial worries have measurable workplace consequences. The Goldman data show substantial shares of younger workers reporting difficulty focusing due to concerns about debt or household expenses. Reduced focus diminishes productivity, impairs learning on the job, and can accelerate burnout.

Evidence from workplace studies links financial stress to higher absenteeism, lower engagement, and increased turnover. Employees preoccupied with bills or multiple jobs cannot invest as much time and energy into upskilling or networking. That erodes lifetime earning potential, trapping workers in a lower-growth trajectory.

For employers, ignoring employee financial health is costly. Lower productivity, higher turnover, and diminished morale directly affect profitability and innovation. Forward-looking firms invest in financial wellness programs, provide emergency savings vehicles, and expand benefits that reduce household stressors—childcare support, commuter benefits, or housing stipends in high-cost areas.

When people retire earlier than planned: causes and consequences

Goldman Sachs’s finding that 44% of retirees left the workforce sooner than planned raises questions about why and how this happened. Early retirements can reflect positive decisions—financial freedom, desire for leisure—but many early exits are forced by job loss, health problems, caregiving responsibilities, or burnout.

Layoffs and corporate restructuring can accelerate retirement among older workers who accept severance packages. Health shocks and caregiving needs can also push people out of paid work earlier than planned. When older workers depart prematurely in significant numbers, the labor market loses experience and institutional knowledge. Employers then face the twin challenges of replacing skills and training less experienced hires.

At the household level, unintended early retirement strains savings. People who leave the labor force early either draw down retirement assets sooner or reduce standard of living. They may rely more heavily on Social Security or other government programs, potentially changing retirement-income dynamics at a societal scale.

The retirement of older workers can also alter career paths for younger employees. On one hand, openings might create advancement opportunities for mid-career workers. On the other, the loss of mentoring and continuity can slow professional development.

The compounding effect: deferred emergency savings, unpaid down payments and retirement shortfalls

Goldman’s analysis highlights a worrying pattern: the items being deferred are often those that provide stability—emergency savings, debt reduction, retirement contributions. Deferring emergency savings increases vulnerability to shocks. A single large medical bill or unexpected job loss can force families to borrow or liquidate retirement accounts, undermining long-term financial health.

Debt dynamics complicate the picture. High-interest consumer debt and student loans reduce the space for retirement contributions. People juggling debt repayments and living costs may prioritize minimum payments over saving, but that choice increases lifetime interest costs and reduces retirement readiness.

The interplay of deferred savings and high housing costs leads to two common scenarios:

• Renters postpone home purchases. That delays accumulation of housing equity, a source of retirement security for many households.
• Buyers compromise on down payments or buy homes with high mortgage payments. That reduces ability to save for retirement and increases financial fragility.

Both scenarios reduce intergenerational wealth accumulation. Younger families that cannot buy homes or save adequately risk entering retirement with lower wealth relative to previous generations.

Practical strategies for individuals: what to do when money is tight

Household budgets under strain require a mix of short-term triage and long-term planning. The following steps are pragmatic and actionable.

1. Prioritize the employer match first. If your employer offers a retirement plan match (401(k), 403(b), etc.), contribute at least enough to capture the full match. It is an immediate, risk-free return on savings.
2. Build a modest emergency fund quickly. Aim for a starter cushion of $1,000 to $2,000, then work toward three months of essential expenses. Keep these funds in a high-yield savings account or money-market fund where they remain liquid.
3. Automate savings. Small, automated transfers reduce decision fatigue. Set up weekly or biweekly transfers that align with paychecks to a retirement account or emergency savings.
4. Tackle high-interest debt. Credit-card and certain personal loans can carry interest rates that outpace investment returns. Use a debt-avalanche (highest-rate-first) approach to minimize interest costs, or the snowball method if behavioral wins help maintain momentum.
5. Reassess housing choices pragmatically. Evaluate trade-offs between rent, commute time and living space. Sometimes moving slightly farther from expensive city cores or seeking roommates can improve the capacity to save while preserving quality of life.
6. Increase earnings strategically. Seek pay raises through documented accomplishments, consider switching roles for higher pay, or pursue upskilling aligned with market demand (cloud computing, healthcare certifications, trades). Prioritize roles that offer total compensation improvements, including benefits and remote flexibility.
7. Use tax-advantaged accounts wisely. Maximize employer retirement matches, consider Roth accounts for younger workers anticipating higher future tax rates, and use Health Savings Accounts if eligible—these offer triple tax advantages for medical expenses.
8. Protect against shocks. Disability insurance and appropriate health coverage prevent medical costs from becoming catastrophic. For dual-earner households, cross-coverage and a written safety plan for major income disruptions reduce uncertainty.
9. Leverage employer benefits. Ask HR about financial wellness programs, retirement planning workshops, student loan repayment options, commuter subsidies, or emergency savings options. Employers may not advertise all benefits proactively.
10. Maintain mental bandwidth. Financial stress depletes cognitive resources. Establish simple, achievable financial tasks each week rather than trying to solve everything at once. Small wins—automated savings, paying down a single debt—improve confidence and capacity.

None of these steps guarantee immediate security, but taken together they create resilience that makes longer-term financial progress possible.

What employers can do now

Employers that ignore tight household finances risk reduced productivity and higher turnover. Several employer initiatives are practical and increasingly common:

• Match enhancements and auto-escalation: Automatically raise retirement contributions incrementally each year, with opt-out rather than opt-in. Research shows auto-enrollment and auto-escalation substantially increase participation and contribution rates.
• Emergency savings vehicles: Offer payroll-deducted, liquid savings accounts or partnerships with fintech platforms to facilitate short-term saving that is separate from retirement accounts.
• Flexible work and commute subsidies: Remote work, compressed workweeks and transit stipends reduce the cost of working and may decrease the need for secondary income.
• Student loan repayment and refinancing assistance: Employer contributions to student loan repayment free up household cash for long-term savings.
• Financial counseling and coaching: On-site or virtual financial planning sessions can help employees prioritize debt repayment, maximize employer benefits and build emergency savings.
• Mental health and burnout prevention: Expanded mental-health coverage, paid time off and scheduling flexibility mitigate the non-financial costs of juggling multiple jobs.

Companies that adopt these measures often realize lower turnover and higher employee engagement, offsetting the direct costs of enhanced benefits.

Policy levers that could ease the squeeze

The forces compressing young workers’ finances are structural and require policy responses alongside private-sector action. Key public-policy levers include:

• Housing supply reforms: Zoning reforms, denser housing allowances near transit, and incentives for affordable housing construction can reduce price pressure in metropolitan markets.
• Support for renters: Policies that expand rental assistance and stabilize rents for lower-income families reduce immediate cost burdens and free capacity for saving.
• Student debt policy: Programs that make higher education less burdensome—income-driven repayment, targeted forgiveness, and expanded grants—reduce lifetime repayment obligations.
• Childcare affordability: Subsidies and increased supply of affordable childcare allow more parents to work and save and reduce the pressure to trade higher-paying jobs for more flexible but lower-paid alternatives.
• Retirement policy nudges: Expanding auto-enrollment for employers that do not offer plans, or providing portability for retirement accounts across jobs, can increase coverage for young, mobile workers.
• Labor-market supports: Wage growth tied to productivity via minimum-wage adjustments or targeted wage subsidies could help households bridge the gap between earnings and essential costs.

Policymakers face trade-offs and fiscal constraints, but targeted actions—particularly on housing and childcare—would relieve pressure points that directly compete with retirement saving.

Scenarios for the future: what happens if current trends persist

Projecting the long-term consequences of these trends yields several plausible scenarios.

Scenario 1: Slow erosion of retirement readiness. If younger cohorts continue to under-save and retirees leave earlier than expected, the aggregate saving rate for retirement will decline. Future retirees may rely more heavily on public programs, and retirement ages could rise.

Scenario 2: Labor-market reshaping. Workers constrained by high living costs may accept lower-risk, higher-benefit jobs, or conversely, pursue entrepreneurial or gig work to supplement wages. Employers that fail to adapt may face labor shortages in high-skill roles.

Scenario 3: Greater policy intervention. Mounting public concern about housing, retirement security and the costs of caregiving could result in more aggressive policy measures—expanded affordable housing programs, redesigned retirement incentives, and bolstered social-safety nets.

Scenario 4: Technological disruption compounds uncertainty. AI-driven changes in the labor market could accelerate job displacement in some sectors while creating demand in others. Workers with limited savings and restricted access to retraining programs will be most vulnerable.

These scenarios are not mutually exclusive. The balance among them will depend on corporate responses, public policy choices and macroeconomic developments.

Real-world examples and case studies

• Gig work as necessary income: Delivery drivers, rideshare workers and freelance contractors often cite unpredictable scheduling and pay as a reason they must hold multiple gigs to meet expenses. While platform work provides immediate income, it rarely substitutes for employer-sponsored retirement plans or health benefits.
• Employer innovations: Several large employers now offer new benefits in response to worker needs—student loan repayment contributions, emergency savings accounts funded through payroll deduction, and enhanced retirement matching. These programs have measurable effects on recruitment and retention.
• Housing policy success stories: Cities that relaxed restrictive zoning near transit corridors and incentivized accessory dwelling units increased housing supply and stabilized rents relative to peer markets. These local reforms demonstrate the impact of supply-side interventions on affordability.
• Early retirement from buyouts: During waves of corporate restructuring, older workers often accept buyout packages and retire early. Observers note that such exits remove experienced employees while creating cost pressures for pension plans and public benefit programs.

These examples illustrate that individual decisions, employer policies, and local housing markets all combine to determine financial outcomes.

How to prioritize: the trade-off between paying down debt, saving for emergencies and retirement

Financial professionals often debate whether borrowers should prioritize debt repayment or retirement contributions. There is no single right answer; the optimal strategy depends on interest rates, employer matches, and individual circumstances.

• Capture the employer match first. If your employer offers a match, contribute enough to receive it. The match is immediate return that usually outweighs many debt interest rates.
• If high-interest debt exists (credit cards), prioritize paying that down after securing the employer match and a small emergency fund. High-cost debt compounds faster than most guaranteed investment returns.
• For moderate student loans or low-interest debt, split excess cash flow between accelerated debt repayment and retirement saving. The goal is to reduce vulnerability to shocks while not missing long-term compounding benefits.
• Maintain liquidity. Avoid fully sacrificing emergency savings to pay down low-interest debt; an unexpected expense could force high-cost borrowing later.

Structured approaches—such as allocating a fixed percentage of income to retirement, a fixed amount to debt repayment, and a cushion for emergencies—make trade-offs sustainable.

The role of financial education and behavioral design

Behavioral barriers often impede effective saving. People procrastinate, underestimate future needs or fail to capture employer benefits. Financial education, combined with choice architecture, addresses these obstacles.

• Auto-enrollment in retirement plans increases participation and contributions.
• Default escalation of savings rates reduces reliance on self-control.
• Clear, simple communication about total compensation and employer benefits increases utilization.
• Personalized retirement projections and short-term financial planning tools help employees see the path to goals, improving commitment.

Employers and policymakers should invest in behavioral design that aligns incentives with long-term outcomes.

Final assessment: the stakes and how to act now

The current mix of high housing costs, elevated borrowing rates, persistent inflation and labor-market uncertainty is compressing younger workers’ financial bandwidth. The immediate response—taking on additional work—reduces time for career advancement and contributes to stress that harms productivity. The long-term consequence is a potential decline in retirement readiness for large cohorts of Americans.

Addressing the problem requires action on multiple fronts. Individuals must use practical saving and debt-management strategies that fit their circumstances. Employers must rethink benefits and total compensation to reduce the need for supplemental work. Policymakers must tackle housing affordability, access to childcare, and retirement policy gaps that amplify the strain.

None of these steps is a silver bullet. But coordinated action can restore the space in household budgets to rebuild emergency savings, reduce debt burdens and put retirement funding back on track.

FAQ

Q: If I’m a millennial or Gen Z struggling to make ends meet, what should I do first? A: Secure any employer match in a retirement plan, create a small emergency cushion ($1,000–$2,000), and tackle high-interest debt. Automate savings and payments to minimize decision fatigue. Seek employer benefits such as student-loan repayment assistance or commuter subsidies and explore upskilling options that improve earnings potential.

Q: Is taking on gig work a good long-term strategy for retirement savings? A: Gig work can provide crucial short-term income but rarely substitutes for employer-sponsored retirement plans, predictable hours, or benefits. Use gig income to build emergency savings or pay down high-interest debt, and try to capture employer retirement matches when available. If gig work is long-term, consider opening an IRA or solo 401(k) to keep saving tax-advantaged.

Q: How do housing costs directly affect my ability to save for retirement? A: High housing costs increase monthly outlays and reduce discretionary income available for saving. For renters, persistent rental payments limit accumulation of emergency savings and retirement contributions. For buyers, higher prices and elevated mortgage rates raise monthly payments, leaving less room for retirement contributions. Strategies include assessing trade-offs between location and price, considering roommates, and saving for a larger down payment to reduce mortgage costs.

Q: What can employers do to help employees who are financially struggling? A: Employers can offer auto-enrollment and auto-escalation in retirement plans, payroll-sourced emergency savings accounts, student loan repayment programs, flexible work arrangements, commuter subsidies and financial wellness coaching. These measures reduce employees’ need for supplemental income and improve retention and productivity.

Q: How will earlier-than-expected retirements among older workers affect the labor market? A: Early retirements reduce experienced labor supply and may create openings for mid-career workers, but they also remove mentors and institutional knowledge. Employers may face short-term skill gaps and training costs. At a macro level, early retirements could increase reliance on public benefits and change retirement-income dynamics.

Q: What policy changes would make the biggest difference for younger savers? A: Policies that expand affordable housing supply, make childcare more affordable, and ease student-loan burdens would free household cash flow for saving. On retirement, expanding access to workplace plans via auto-enrollment or portable accounts would increase coverage among mobile workers. These measures, combined with support for wage growth, are the most direct levers to improve saving capacity.

Q: Should I prioritize paying off student loans or saving for retirement? A: Capture an employer match first. Beyond that, for high-interest student loans prioritize repayment, especially if rates exceed likely after-tax investment returns. For low-interest loans, balance repayment with retirement saving. Maintain an emergency fund to avoid future costly borrowing.

Q: Is remote work an effective way to offset cost pressures? A: Remote work can reduce commuting costs and broaden job options to lower-cost regions, improving net income. However, remote positions vary in pay and benefits. Consider total compensation and career-development opportunities when evaluating remote roles.

Q: What role does inflation play in this picture? A: Persistent inflation raises the cost of goods and services, shrinking real income. Even moderate inflation levels increase the dollar amount needed to reach the same standard of living and can erode savings if wages do not keep pace. That makes saving more challenging and places a premium on wage growth and cost-of-living adjustments.

Q: How quickly can I realistically improve my financial situation? A: Improvement timelines vary. Small, consistent actions—capturing employer matches, automating savings, reducing high-interest debt—can show progress within months. Significant changes, like building a full emergency fund or changing housing, may take years. The key is sustainable, consistent improvements rather than dramatic short-term moves.