Millennials and Gen Z counting on a 401(k) to get them through retirement are in for a rude awakening, TIAA head says

• Half of millennials and Gen Z expect employer-based savings plans to be enough for retirement, a TIAA study shows.
• That's not true, the TIAA head says. Millennials and Gen Z could be in for a dire future unless they save differently.

If you're a young American saving for retirement, your future might be less secure than you think.

That's according to Thasunda Brown Duckett, CEO of the Teachers Insurance and Annuity Association of America-College Retirement Equities Fund (TIAA). There are several big changes coming to retirement over the next five years, Duckett told MarketWatch this week. And even though that includes what she calls "one of the greatest transfers of intergenerational wealth" to millennials and Gen Z, the current investing habits of those younger generations, as well as the changing nature of work, are poised to put their future savings in jeopardy.

Duckett said that a worrying number of millenials and Gen Z are relying on old retirement wisdom that worked for their parents and grandparents, but won't be enough for them. Citing a recent TIAA study showing that half of millennials and Gen Z still expect all of their retirement income from a 401(k) or 403(b) plan, she said that these sort of employer-based retirement plans won't be enough to get them through their golden years.

"Compared with their parents and grandparents, younger generations have fewer options to save for retirement," she said, referencing pension plans as one example of an employer-sponsored program that older generations had in abundance that younger people rarely have access to today.

That's in addition to many Americans not having any sort of retirement plan at all, with one-third of Americans reporting that their employers don't offer one, according to the same TIAA study.

"The delta between what younger generations have access to and where they think their retirement income will come from could have serious long-term consequences," Duckett said.

Some economists are predicting that Gen Z and millennials will see a retirement crisis

At least 60% of Boomers will enter retirement without sufficient savings, Boston University economist Laurence Kotlikoff told Insider's Jacob Zinkula, based on his research of the generation's retirement challenges. And he says there's "every reason to think the situation will get worse for those behind the Boomers," for reasons such as the rising cost of homeownership, which normally provides a solid "inflation hedge."

Duckett said that she wanted policymakers and employers to increase access to retirement savings plans, as well as educating workers about income options such as annuities. She also encouraged Gen Z and millennials to seek out savings vehicles like IRAs, which aren't dependent on an employer.

Scott Heise, a wealth management advisor at TIAA, told Insider that in addition to a 401(k), people also need to "diversify their income and make sure their retirement savings don't run dry."

"In retirement, we recommend that two-thirds of your income should be lifetime income," he said, recommending annuities, which a growing number of workplace retirement plans include as an investment option.

"One type of annuity – a variable annuity – provides both a lifetime income and a hedge against inflation," he said.

Kotlikoff recommended that young people invest in a low-cost diversified index funds, adding to it over time, and not touching it until retirement. He also said that social security reform is one way for the government to intervene and help upcoming generations.

It's a testament to how much employers have sapped their retirement packages over the past few decades that Gen Z and millennials could be in trouble. That's because the Silent Generation and Baby Boomers will transfer somewhere between $30 trillion and $68 trillion to their adult children, which will give younger generations a large savings bed. Duckett also sees younger people as ramping up responsible investments as they attempt to cope with immediate effects of climate change in addition to planning their futures.