Generation Z, the youngest working generation, is commonly thought of as being consumed with the present and uninterested in the future. However, recent research has shown that this stereotype may not be accurate, as many Gen Z individuals are excelling at saving for retirement, despite being in the early stages of their careers.
A study conducted by Allianz Life found that over half of Gen Z (57%) is already saving for retirement, compared to just 44% of millennials. This is a remarkable achievement, given that many members of Gen Z are still in their early 20s and may not yet have the earning potential of older generations.
One possible reason for Gen Z’s financial prudence is that they grew up in a world of economic uncertainty. The Great Recession of 2008 and the COVID-19 pandemic have undoubtedly shaped this generation’s outlook on financial stability and future planning. As a result, many Gen Z members have become more aware of the importance of retirement savings and have started to prioritize it accordingly.
Another factor that may be influencing Gen Z’s saving habits is the influence of their parents. Many Gen Z individuals have grown up with parents who emphasized the importance of saving and financial responsibility. This upbringing has likely instilled a sense of financial discipline in Gen Z and encouraged them to prioritize retirement savings.
Technology is also playing a significant role in Gen Z’s saving habits. Gen Z has grown up in a world where technology is ubiquitous, which has made it easier for them to access information about personal finance and retirement planning. Online resources and apps make it easier for Gen Z to learn about retirement savings and to track their progress towards their goals.
Tips for Saving for Retirement
While Gen Z is already on the right track with retirement savings planning, there’s always room to improve. These tips can help Gen Z (and you) save as much as they can towards retirement.
Take advantage of your employer match: Why turn away free money? If your employer offers a 401k match, take advantage of it, as it’ll help grow your retirement savings without you having to do anything.
Cash in on compounding interest: Investing as early as you can helps you maximize the value of compounding interest.
Contribute to a Roth IRA: If you don’t have a 401k through your employer, consider setting up a Roth IRA. The annual contribution limit for 2023 is $6,500 and is a great vehicle for retirement savings. You can only contribute to a Roth IRA if your income is below a certain threshold, $144,000 for a single filer or $214,000 for those married filing jointly.
Start contributing now, even if it’s just a little: While many Gen Z workers might not have a lot to contribute, every dollar counts. Working retirement savings into your budget, even if it’s a small amount, can help get you in the habit of thinking of long-term financial success.
No matter what generation you belong to, there are steps you can take to ensure that you are on track for a comfortable retirement. And the most critical step is to start saving as early as possible so you can take advantage of this compounding effect and maximize your retirement savings.
As your generation continues to mature, your focus on retirement savings will be crucial to your long-term financial stability and success.
Your advisor can help.
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