Lester shared what employers, as plan sponsors, and the benefits professionals who work with them, can do to encourage Gen Zers to "save smart," starting with the three-step framework.

Katie Kuehner-Hebert: Tell me about the three-step framework.

Anne Lester: There are three things that are absolutely the foundation for employees to have as much control as they possibly can over how and when they're able to retire.

First, plan sponsors should make sure an automated savings program is available to their employees and that they are using it. Saving before money hits their employees' bank account is the most powerful way to save.

Secondly, plan sponsors and benefits professionals should encourage employees to steadily increase the amount they are saving. For example, any time an employee gets a raise, they should be encouraged to save half of that, before they get used to a higher standard of living. That way, they'll be better able to support themselves in retirement when they do have a higher standard of living. Employees should be encouraged to get to a savings rate of 10 to 15 percent of their salaries, and even more if they want to retire early.

Thirdly, plan sponsors within their workplace savings programs should include well-designed qualified default investment alternatives, which are often target-date funds. Employees can get caught up in the fear/greed cycle which can lead to buying high and selling low. That's when target-date fund management is really beneficial – when emotions are taken out of the equation, savings plans generally do better.

What advice can plan sponsors and benefits professionals give to help Gen Zers succeed in their savings goals?

We don't want employees to be fighting with themselves and wrestling with behavioral biases that can hinder their savings goals. For example, there's present bias, in which a person believes what's in front of them right now is more important than saving for the future.

I know it can be really discouraging when young people are just starting out, to be expected to save 10 to 15 percent of their salary. When they get that first raise, they are so excited to finally be making some money and they just want to spend it. But it's important for them to really get in the habit of paying themselves in the form of saving. They don't have to start saving that much right away – they can get there over 10 years in small bits, and that's totally fine. Plan sponsors and benefits professionals should support Gen Zers in these small steps.

How can Gen Zers become financially ready to retire – no matter where they are in their career?

If an employee is really committed to leaving the formal workplace early, it comes down to either saving most or all of any future pay increase, and/or lowering their standard of living so they can save more now. In later years, it gets much harder to reset one's lifestyle if they realize they haven't saved enough after they retire.

There is such a thing as the hedonic treadmill – lifestyle creep. What happens when an employee gets that first raise and they buy a new car for the first time in their life? The happiness they get from finally having a new car then fades really quickly and they begin taking it for granted. Then they buy a new car with upgrades, such as electric seat warmers, and they are happy for a couple of months until they become accustomed to having an upgraded car.

If employees truly want to retire early, they have to be mindful of preventing or at least minimizing lifestyle creep, and they also need to save more. People who are successful in the FIRE movement – Financial Independence, Retire Early – never get on the hedonic treadmill. That doesn't mean they have to live solely on rice and beans, it just means they're really conscious of how they live. Plan sponsors and benefits professionals can provide Gen Zers support if they choose to belong to this movement through holistic financial wellness programs that help them understand the spending and saving choices they are making.