Gen Z gets dumped on a lot about its work ethic. They are often stereotyped as lazy and less motivated than their older counterparts; want higher wages for low-skill jobs; and want work schedules to meet their needs, not those of the company.
Whatever the truth is in these broad-stroke complaints, Gen Z kicks butt compared to Millennials, Gen X, and Boomers in one area where it counts most: saving for retirement.
Young people today are starting their retirement savings earlier and they are saving more than any prior generation. In fact, a good argument can be made that Gen Z’s work ethic and savings ethic spring from the same well.
24/7 Wall St. Insights:
- Gen Z doesn’t win many accolades from older generations for their work ethic, but they trounce their elders where it counts most.
- Young folks are starting to save for retirement almost as soon as they enter the workforce, which is as much as a dozen years sooner than Boomers.
- Gen Z can put that early start to their advantage and exceed their goal for an early retirement by using time and the power of compound interest to generate fabulous wealth.
Save early, save often
According to data from a Northwestern Mutual study, Gen Z is saving for retirement almost out of the gate from when they graduate college.
Where Millennials began saving at age 27 and Gen X began at 31, today’s young workers are starting at an average age of 22. That’s a jackrabbit start on the path to a secure retirement compared to the glacial pace Boomers took when they took their first steps towards savings at 37 years old.
But there are some very good reasons why Gen Z has to start saving sooner than the generations that came before.
Get in, get out, move on
First, many Gen Zers believe they will live forever. Or at least till 100 years old. According to the life insurer’s study, 30% of Gen Z and Millennials think they can hit the century mark compared to 22% of Gen Xers and 21% of Boomers.
And they might. Studies show both Gen Z and Millennials prioritize eating healthy and getting exercise, but Gen Z also places a higher priority on mental health and managing stress more than anyone else. It might be why they’re so demanding in the workplace. Yet this holistic approach to health, coupled with ongoing advances in medicine and technology, makes it more likely they will live longer than their parents or grandparents.
Second, Gen Z is looking to retire earlier than other age groups. The Northwestern Mutual study found the younger crowd wants to quit the rat race by 60. That’s more than four years earlier than Millennials expect to retire, seven years sooner than Gen X, and a dozen years ahead of Boomers.
The average age most people expect to work is 65.
The stress of financial strain
These attitudes undoubtedly exhibit themselves in Gen Z’s purported work ethic. Because they value a healthy mind as well as body, they’re not willing to subject themselves to mindless work for little gain.
Gen Z is under tremendous financial stress unlike those who came before them. Working 9-to-5, buying a home, raising a family, and retiring with a gold watch is out of reach for many. With the average price of a house costing over $412,000, Gen Z won’t be able to afford one. And considering the average cost of a 469 square foot studio apartment is $1,562 per month, they can barely afford rent.
Now add in the cost of a car, raising a kid, repaying back exorbitant student loans, and all the other expenses that go into daily living, and you can begin to understand why Gen Z devalues the treadmill everyone else is on.
They have to start saving for retirement right away because they also believe they will need $1.63 million on average to live comfortably in retirement.
Ahead of the game
Yet it is great that Gen Z is saving earlier for retirement. Everyone should. It means they have the best chance of obtaining their goal. By starting early, making regular contributions, and allowing time and the magic of compound interest to work in their favor, they ought to be able to exceed their goals.
It is a powerful combination that can turn even a small amount of money into a fabulously large sum far sooner than expected.
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