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Does Gen Z Already Have a Retirement Problem?
By Elizabeth Gulino
Although they've only been in the professional sphere for
less than a decade, Gen Z has already shaken up work
as we know it. They're quiet quitting, overcoming
imposter syndrome, taking adult gap years, and fully
embracing being the personality hire. But they're also,
apparently, not saving enough for retirement.
According to the Teachers Insurance and Annuity
Association, a financial services company, only 20
percent of Gen Zers are currently saving for retirement.
Surya Kolluri, head of the TIAA Institute, says there are a
myriad of reasons as to why Gen Z may be behind on
starting to save for this milestone: The cost of living is
higher, financial pressures are abundant, student debt is
climbing, and there's been more of a desire to achieve a
healthy work-life balance and flexibility in careers instead
of a six-figure salary. And of the 80 percent of
respondents who haven't started saving, 35 percent of
them admit they don't even know where to start.
A recent Bank of America study provided further
confirmation: based on internal deposit account data, the
banking institution found that Gen Z on average doesn't
have enough saved to cover a month of expenses.
Kolluri says one of the biggest roadblocks in Gen Z's path
to retirement is a lack of knowledge. Saving, investing,
and the power of compounding aren't exactly taught in
schools, and there are enough fin-fluencers and
resources out there to make even the most dialed-in Gen
Zers feel overwhelmed.
The most common — and easiest — path toward
retirement is taking advantage of an employer's 401(k).
Lauren, 24, does, but while her current company
matches 4 percent of her contributions, she tells PS her
former employer didn't match at all. "I didn't even realize
that that was such a benefit I was missing," she says.
"When I would tell people that they weren't matching it
they were like, what? How are they getting away with
that? And I had no idea." Now, of course, Lauren is
taking full advantage of her employer's plan — but she
would've been more ahead in her saving game if she
knew what to look for before.
Of the 20 percent of the Gen Zers surveyed currently
saving for retirement, 66 percent of them do so through their employer, according to the TIAA. But thanks to
dwindling job security and the rise of the gig economy, a
chunk of the workforce has been left behind on
retirement planning.
Angelina, 27, comes from a family of restaurateurs and is
currently partial owner of a restaurant. Currently, she has
zero retirement savings. Her dad, however, opened his
first restaurant at 36 and was able to retire at 60. "He was
able to start something and retire in less than 25 years,
which I think gave me a false perception of reality," she
says. "I think I'm going to be able to achieve the same
thing, but I haven't saved a dime.
"I pay into social security, but that's not necessarily
enough to survive on, if that even exists by the time that
I'm able to collect it," Angelina adds.
Jane, 25, is at the opposite end of the spectrum: She's
currently planning to retire in her 30s — at least, in a way.
For most of her working life, she's held two full-time jobs
and currently owns a townhouse in downtown Toronto
that she rents out to tenants. She lives with her parents
to save money and tells PS that 50 percent of her income
goes to investments, including retirement.
Right now, she's using Financial Independence, Retire
Early (FIRE) as a guide, which follows a formula of
saving, investing, and frugal living to reach "financial
independence" in a short time frame.
"It's a more flexible variation of retirement," Jane
explains. "Retirement doesn't just take one form. There
are a lot of different types of it. It's not never working —
it's being work-optional, being flexible, being able to take
really long breaks."
The first milestone under FIRE is called "barista fire,"
which Jane is currently working toward obtaining. "It
gives you flexibility to be work-optional and gives you
flexibility to have enough [saved] that you can be a
barista, for example, or work part-time for the rest of your
life so you're not dependent on a full 9-to-5 corporate
job," she says. "My first FIRE milestone is hopefully
saving $700,000. That would enable me to find
alternative sources of income as opposed to a full 9-to-5."
Jane's not exactly the norm, however. Kolluri says that
employers like Lauren's play a vital role in enabling their
workers to get on a strong financial plan, meaning that
freelancers or those who are self-employed, like
Angelina, need to work that much harder to get
themselves started. If you fall into that bucket, he says
that looking into individual retirement accounts (IRAs) are
a good place to start.
Haley Sacks, a financial influencer known as Mrs. Dow
Jones, agrees that endless opportunities to buy and
consume don't help very much when it comes to saving.
"I think it's really hard when you're constantly bombarded
with so much to buy and so much FOMO," she says. "It's
very easy for people to spend everything that they make."
Jane, Lauren, and Angelina all cite similar reasons for
their age group's lack of retirement funds: the rising cost
of living, a shortage of knowledge, and endless
opportunities to spend money under capitalism. "We live in a time where our FYPs and our Instagram feeds are
perfectly tailored to things we want to purchase and
overconsumption is so normalized," Angelina says. "I
would say [Gen Z not saving] is more because of
overconsumption and the need to shop that's ingrained in
us versus not having things like a 401(k), or whatever the
hell it's called."
Kolluri says education and instilling confidence among
young people when it comes to their money is a must.
Saving for retirement is vital — not only for living
expenses to be covered with age, but medical expenses,
too. "The average couple spends over $300,000 on
healthcare in retirement in cash," Sacks says. "The funds
that you're saving are not just to live in Boca and play golf
all day they're also to take care of yourself as your health
deteriorates."
Kolluri says that what's different about Gen Z is they
value one thing above all else: freedom. "People in this
demographic express interest in wanting to maintain the
freedom to pursue their interests and being able to
financially manage their lives," he says. "That is a new
combination we have not seen in other generations."
Retirement is a long way off for Gen Zers. Angelina,
though, is already looking forward to the future. "2025 is
my year to get my shit together," she says.
https://www.popsugar.com/money/gen-z-retirement-49425345