We Asked 2 Financial Experts: What’s the Biggest Threat to Gen Z’s Retirement Savings?
Written by
John Schmoll
Edited by
Zuri Anderson
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Financial anxiety is a common trope used towards Gen Z. Despite the stereotype, a majority of Gen Z individuals are actively seeking to build savings and reduce debt, according to Adviserpedia.
It’s easy to believe that Gen Z is only facing one financial threat when, in fact, they’re facing a variety of risks that may hinder retirement planning. Wading through those problems can make saving for retirement challenging at best.
GOBankingRates asked two financial experts for the biggest threats to Gen Z’s retirement savings. Here’s what they had to say.
Debt
High-interest debt is suffocating, making it difficult to save.
“Many Gen Zers have high credit card debt, which is a large factor holding them back from their retirement savings goals. The average Gen Zer has over $3,000 in credit card debt, and that number continues to rise,” said Jason LaBarge, president and financial advisor at LaBarge Financial.
Interest payments stress a budget, leaving little left to go towards retirement planning. Lack of knowledge isn’t always the problem, though. It’s simple math.
“From what I see with younger investors, the biggest threat isn’t always a lack of knowledge; it’s often a lack of margin,” added Julia Bartak, certified financial planner (CFP) and financial advisor at Edward Jones. “Their budgets are so tight that even when they want to save, there simply isn’t enough leftover cash after student loans, rent and basic life expenses.”
Worse yet, the average Gen Z has monthly student loan payments of $526, according to Empower. When you combine credit card debt and student loan payments, it’s easy to see why many Gen Zers have little left over to save for retirement.
Increasing Costs
Americans are facing significant economic headwinds, making it challenging for many to save for future goals. For Gen Zers dealing with significant debt loads, the growing costs intensify the situation.
It’s easy to believe that the younger generation is spending on unnecessary luxuries. That’s often not the case, argues Bartak.
“With Gen Z clients, the biggest hurdle is cash-flow suffocation. They’re not necessarily overspending on luxuries; often they’re overspending on necessities. Rent alone can take up to half of their take-home pay, not leaving enough room for long-term planning,” said Bartak.
Add to that rising prices due to inflationary pressures and tariff-induced increases, and it leaves Gen Zers with a dwindling pool of funds in their budgets to devote to long-term planning.
Lifestyle Creep
Lifestyle creep is inevitable for most Americans as they see their incomes rise. A key driver for this mindless spending is subscriptions. The average American spends $1,080 on subscriptions annually, according to a CNET study. These overlooked leaks erode funds that can be used for retirement savings.
“One trap I see constantly is ‘subscription creep’ with digital subscriptions, apps and memberships. It feels small, but it erodes the exact dollars that could help build early savings habits,” noted Bartak.
While seemingly insignificant, those small costs can add up, keeping you from saving for retirement.
Procrastination
Retirement feels like it’s so far off for most Gen Zers. This feeling may make it seem as if small, consistent actions don’t move the needle for retirement savings. Saving even small amounts in the beginning is better than delaying until you feel you have something worthwhile to save.
“Younger generations often believe that they can put off saving for retirement until later in life. This could not be further from the truth. The earlier you can save, the better off you will be. Many retirees I work with tell me they wish they had started saving earlier,” said LaBarge.
Procrastination is the enemy of saving for retirement, as it easily turns into avoidance.
“Many Gen Z clients tell me they’re afraid they’ll never be able to retire. That fear leads to avoidance, and avoidance delays action,” added Bartak.
Time is your best advantage when it comes to investing, not how much you begin with. Thankfully, tools like a 401(k) account can do much of the heavy lifting for you while still taking action.
Financial anxiety is real, but many Gen Zers are also financially proactive. Such proactivity is the best way to tackle threats and make financial progress.
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