How Gen Z Differs From Boomers When It Comes To Retirement Planning

Shot of a young couple going through paperwork while using a laptop at home.
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Generation Z — defined as anyone born from 1997 to 2012 — is in a unique situation when it comes to their money. Many are just starting out as adults in a fragile financial situation, dealing with the rising cost of living, rent payments, student loan debt and more, according to Kayla Stern, a retirement income consultant at TIAA. She added that Gen Z is frequently more concerned with balancing short-term financial priorities (such as paying off debt and maintaining savings) with long-term retirement goals than other generations. 

“While each generation faces different challenges as they strive toward financial stability in retirement, there are subtle differences that set Gen Zers apart from baby boomers when it comes to obtaining the retirement savings they desire,” Stern said.

Let’s take a closer look at what those are.

Saving Earlier

Unlike boomers, Generation Z is further removed from the era of pensions. Plus, they witnessed the devastation that their parents’ 401(k)s experienced during the Great Recession. “So Gen Zers are saving for retirement earlier out of necessity, and they are often more focused on achieving their retirement goals,” Stern said. 

In fact, Gen Z workers are saving 14% of income for their golden years, on average, according to new research from BlackRock. That’s more than older generations, who are saving about 12%.

Work Attitude

One of the biggest differences between Gen Z and boomers may be in their overall approach to work and retirement, said Jay Zigmont, CFP and founder of Childfree Wealth. “For boomers, it may have been possible to work the same job for 25 years, get the watch and retire,” he said. Gen Z, on the other hand, tends to be more mobile and change jobs every two to three years.

Are You Retirement Ready?

Zigmont explained that switching jobs regularly often results in larger income jumps than sticking with a company for decades. However, it can also create some challenges for retirement, as Gen Z may have a collection of different 401(k) accounts and some employers won’t let you contribute in your first year.

“Additionally, some Gen Zers — in particular, the child-free ones — may even choose not to retire.” Instead, he said, they may choose to live the FILE lifestyle (which stands for Financial Independence, Live Early).

“If retirement is an on/off switch for work, FILE is a dimmer switch,” Zigmont added. “It reflects doing the right type and amount of work now, rather than waiting for retirement.”

Appetite For Risk

Because of a Boomer’s stage in life, their retirement plan needs more stable investments that aren’t heavily influenced by market fluctuations and uncertainties, according to Todd Parriott, founder and CEO of Connect Invest

On the other hand, Gen Z still has many decades before approaching retirement. That said, Parriott noted that it’s always good to start planning for retirement young, especially given the economic and market instability Gen Z has faced in recent years.

And many are taking full advantage of all that time by shouldering a high amount of risk. One small survey by E-Trade in 2021 found that 70% of Gen Z and millennials said their risk tolerance had increased within the last three months. Additionally, younger investors were more willing to invest in risky assets, were trading more often and were more confident than they were before the pandemic.

Are You Retirement Ready?

Bottom Line

Despite these differences, there are certain principles of retirement planning that will never change.

“Regardless of age group, the secret to building a retirement nest egg you can live on requires discipline,” Stern said. “Baby boomers and Gen Zers alike can win by getting the most out of their employer match and saving early in order to reap the benefits of compounding interest.”

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