Gen Z struggles to see retirement as a reality. 23% believe they won't ever be able to retire. (iStock)
Generation Z faces an uncertain financial world, and they’re well aware they likely won’t have the same benefits as generations that preceded them. Roughly one quarter (23%) of Gen Z don’t expect to ever be able to retire, according to a recent McKinsey & Company study.
This belief stems from a variety of factors, but a major reason is the current job market. Minimum wage is largely stuck at the same as it was 13 years ago and Gen Zers don’t believe the pay they get for the work they do allows them a good quality of life, the McKinsey study cites.
Additionally, while Gen Z has some of the lowest student loan debt compared to Gen X and Millennials, student loans are still a significant burden for the younger generation. Gen Zers average a little over $20,000 in loans upon graduation.
On top of heavy student loan debt and a less than perfect job outlook, Gen Z also faces a higher degree of mental health conditions. The McKinsey study shows that 55% of 18- to 24-year-olds surveyed have been diagnosed or treated for a mental illness. Of these, more than a quarter say that mental health issues impact their working ability.
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Homeownership is also less of reality, according to Gen Z
Gen Z doesn’t expect to own property any time soon, with just 41% expecting to own a home one day, according to the McKinsey study.
With the housing market still sizzling, even as interest rates cool, Gen Zers see owning a home as a long shot. 52% go as far to say that they’d need to win the lottery in order to ever afford one, a Zillow study found.
Without lottery winnings, 95% of the Gen Zers Zillow polled said they would need to make serious life changes to make homeownership affordable. 28% said they would need to change their careers if they wanted to buy a home right now.
"These findings highlight the gap between Gen Z and millennials' dream of owning a home and their ability to actually make it happen," explained Amanda Pendleton, Zillow's home trends expert. "Combine rising rates with record-breaking home value appreciation, and it's easy to understand why younger generations are wondering how they'll ever be able to afford a home."
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Gen Zers are ahead in saving
Despite their grim outlook on many financial milestones, Gen Z is credited with being the generation that saves the most, according to a Vanguard study.
Vanguard found that 62% of Gen Z participated in their employer-sponsored retirement plans in 2021. That’s the largest increase of any generation since the early 2000s, signaling that younger generations are more aware of the benefits of long-term saving.
"Gen Z savers, on average, have higher account balances than their predecessors, said Nilay Gandhi, a certified financial planner and senior wealth adviser at Vanguard. "[This is] in part because they are investing earlier and often and taking advantage of retirement plan benefits."
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FAQs
Gen Z are more bullish on early retirement than millennials—and the majority think they'll be able to get by on just $500,000 in savings. Some Gen Zers anticipate working for just two decades before kicking up their feet and living off just $500,000 for the following 60 years.
What year will Gen Z retire? ›
The most common answer was different for each group. For Gen Z, the largest group (33%) think they will retire between 61 and 70 years old. Millennials, on the other hand, have the highest percentage (30%) believing they'll retire a bit earlier, between 51 and 60 years old.
Why can't millennials retire? ›
One recent report, from Northwestern Mutual, found that millennials believe they will need $1.65 million to retire comfortably. To date, however, millennials have amassed only $62,600 in average retirement savings. That leaves a retirement “gap” of more than $1.5 million.
Why most people will never retire? ›
“Far too many people lack access to retirement savings options and this, coupled with higher prices, is making it increasingly hard for people to choose when to retire,” said Indira Venkateswaran, AARP's senior vice president of research.
What does Gen Z struggle with the most? ›
Gen-Z feels substantial anxiety and stress about jobs, long-term financial stability and major life steps, such as buying a home and starting a family.
Will Gen Z be able to afford houses? ›
But because Gen Z-ers earn more, the share of income required (27 percent) is roughly equal for both generations. Who's Had a Harder Time Buying a Home: You or Your Parents? Owning a home would cost Gen Z-ers about $165,000 during the eight-year period studied, while the millennial cost is greater, about $172,000.
What will Gen Z life expectancy be? ›
The members of Generation Z, the oldest of which are now in their 20s, on average are expected to live to 100 and beyond. Health technology may or may not eventually lift Gen Zers well past that. They could be the generation that collectively hits the biological ceiling.
Do Millennials need 500k a year? ›
But millennials greatly skewed the results, requiring a whopping $525,000 per year in income to be happy. If you took that generation out of the equation, the average required income would be less than half of what the overall survey reported.
Will Gen Z be more successful than millennials? ›
Zoomers, however, are much better off than millennials were at the same age. The typical 25-year-old Gen Z-er has an annual household income of over $40,000, more than 50% above baby-boomers at the same age. Gen Z's economic power was on display at a recent concert by Ms Rodrigo in New York.
Which generation quits the most? ›
Gen Z workers also report the highest rates of wanting to quit their jobs within the last three months compared to all other generations. In addition to feeling the least engaged in work, Gen Z also finds their responsibilities uninspiring.
“For my own personal mental health and well-being, I like being active and working.” Cavedon is part of a growing number of baby boomers, many of whom are college-educated, who continue to work well past 65 not because they can't afford to retire, but simply because they love their work—and don't want to give it up.
Will Gen Z get Social Security? ›
Generation Z has decades to go before they can begin claiming Social Security, but almost half of the people in that group don't think they'll get any benefits when the time comes.
Why aren t Americans saving for retirement? ›
And saving for retirement is only becoming more difficult as Americans deal with rising costs. Escalating housing, healthcare, and long-term care costs in retirement are creating financial obstacles for many Americans.
Are people happier when they retire? ›
77% of pre-retirees anticipate feeling happier on a typical day in retirement compared to 67% of current retirees who say they are happier. 75% of pre-retirees expect to feel less stressed, which matches retirees' experiences.
What age is the best time to retire? ›
The normal retirement age is typically 65 or 66 for most people; this is when you can begin drawing your full Social Security retirement benefit. It could make sense to retire earlier or later, however, depending on your financial situation, needs and goals.
What generation is reaching retirement age? ›
Baby boomers remain economically and politically influential because of their large numbers and the relative prosperity of the U.S. economy during their working careers. Many are facing serious financial challenges, however, as more and more baby boomers reach retirement age.
Is Gen Z struggling financially? ›
“Gen Z consumers have seen their finances significantly impacted by the pandemic and its aftermath, even more so than the challenges faced by millennials as a result of the Global Financial Crisis,” Michele Raneri, vice president and head of U.S. research and consulting at TransUnion concluded.
What is Gen Z most passionate about? ›
Gen Zers generally have strong values related to racial justice and sustainability. Mobilizations like the Global Climate March, led by Gen Z activist Greta Thunberg, thrive on the activism of young people. Climate change is one of the issues Gen Zers care about most.
Where do younger people want to retire? ›
Millennials' Favorite States for Retirement
For younger millennials (ages 25 to 34), the preferred states to retire in the South are Florida (28%), Texas (17%), North Carolina (10%) and Georgia (9%). Older millennials (ages 35 to 44) prefer Florida (28%), Texas (14%), North Carolina (12%) and Tennessee (6%).
