Now 24, Chan has six figures saved in three different retirement funds (she recently opened a Simplified Employee Pension (SEP) IRA to fund her side hustle as a content creator).
And she’s part of a growing number of Gen Zers who are super-saving for retirement.
Today’s young professionals are prioritizing retirement now more than ever before: The average Gen Zer starts saving for retirement at age 22, while Millennials start at age 27, Gen Xers at age 31 and Baby Boomers at age 37. That’s according to a January survey of 4,500 U.S. adults. From Northwestern Mutual.
So why would a young person hoard money that they won’t be able to touch for decades?
Insecurity is a big factor: Many worry about wages stagnating at a time when the cost of living is soaring, says Paloma Thonbury, chief people officer at Handshake, a job site for college students and recent graduates.
Americans estimate they’ll need to save $1.46 million to live comfortably in retirement, up 53% from 2020, according to Northwestern Mutual.
Thonburi said Gen Z is watching their millennial predecessors struggle to reach typical financial milestones like paying off student loans and buying a home.
There’s this notion that the government doesn’t care about your retirement, so you have to do it yourself.
Lillian Chan
23-year-old with six-figure savings for retirement
Others are seeing older family members struggling: More than half of students currently attending college are financially supporting their parents or grandparents or plan to do so in the future, the survey found. December Survey Of Handshake’s 2,500 students, students of color are especially likely to shoulder this financial burden than white students.
Meanwhile, Chan, like many of his colleagues, doesn’t expect Social Security to last him by the time he retires. The Social Security trust fund is A shortage is predicted In 2035, cuts to benefits will occur unless Congress acts.
““There’s this idea that the government isn’t going to take care of you in retirement, so you have to figure things out for yourself,” Chan said. “If you’re young and you’re relying on Social Security, I think that’s really dangerous.”
When young people can’t count on the government for retirement assistance, they turn to employers to cover the costs.
According to Handshake, retirement benefits are one of the top priorities for the Class of 2024 when searching for a new job, with 65% of college seniors saying they would not accept a job offer from a company that doesn’t offer an employer-sponsored 401(k).
More on Gen Z in the Workplace:
Gen Z bosses discuss 6 misconceptions people have in the workplace: ‘We see these stereotypes getting in the way’
Gen Z is taking over the C-suite and doing away with meetings and set work hours.
About 70% of Gen Zers are freelancing or plan to become freelancers. “I’ve never even thought about applying for a job.”
So far, employers have played a major role in helping Gen Z save for retirement. One recent study found: Vanguard ReportWorkers between the ages of 18 and 24 are 32% more likely to be invested in a workplace retirement plan than their older peers, which means more Automatic Registration Greater access to options and plan information.
Such was the case for Genesis Hinkley, 27, a Google business analyst in Boulder, Colorado.
When she started working there four years ago, her benefits included working with a financial advisor to review her benefits package. She learned about a retirement option where the employer would match 50% of every dollar contributed and decided to put 7% of her monthly pay into a 401(k).
Genesis Hinckley, 27, works as a business analyst at Google in Boulder, Colorado.
Courtesy of Genesis Hinckley.
She admits she didn’t fully understand how the process worked before making her choice, but is of the opinion that “experience is the best teacher.”
“I think Gen Z is less afraid of investing,” Hinckley said. “They’re like, ‘OK, let’s do something about it.'”
Hinckley has gotten smarter over the years, and now contributes 18% to a Roth 401(k) and 5% to a traditional 401(k), maxing out each year. Her balance now stands at about $138,000.
Fears aside, many Gen Zers see supersaving for retirement as a way to take control of an uncertain future where they lack existing support systems.
Social media has made it feel less of a solitary endeavor, and Chang and Hinkley say their peers on YouTube and TikTok have taught them things they didn’t learn in school or at work, like when it makes sense to invest in pre-tax versus after-tax plans, how to realistically invest retirement money, and the value of compound interest.
They also view retirement savings as a yearly goal, rather than a decades-long one.
For example, in her personal finance classes, Chan learned about the benefits of saving in a Roth IRA when tax rates were lower. This created a sense of urgency for Chan to get started right away, before she started receiving a full-time salary.
Everybody knows what the end of their career will be like. [Gen Zers] We’ve been thinking about that since day one, so it’s an interesting change.
Paloma Thonburi
Handshake Chief Human Resources Officer
Young professionals are receiving more personal financial advice than ever before and are “very aware of the opportunities they need to take advantage of and want to make sure they aren’t left behind,” Thonbury said.
As with the workplace and career paths in general, Gen Z is redefining what retirement looks like.
“People expect their career trajectory to be different from their parents’,” she says. “Everyone has a sense of what their career will end up like. [Gen Zers] That’s what we’ve been thinking about since day one, so it’s an interesting change.”
As for her retirement goals, Chan is still figuring them out, but she’s confident she can secure the funds to dream big. For Chan, the options come down to saving aggressively now to give herself flexibility for the future, and having “the choice to do what I want without being tied down by money.”
Hinckley shares a similar sentiment, saying there’s no need to make big sacrifices to your retirement savings.
“Many people think that saving for retirement means they won’t be able to enjoy the life they have now,” she says. “I’m saving aggressively for retirement and investing in real estate, and I’m still living the life I love.”
She sees her goal for retirement as redefining her American dream: “Not making others rich, but getting my time back.”
That might mean building your own business or passive income stream rather than working for a corporation. [my hobbies] When I’m 70.”
“I’m not chasing money anymore,” she says. “I’m chasing time.”
Want to land your dream job? take CNBC’s new online course, “How to Ace a Job Interview” Learn what recruiters are really looking for, body language techniques, what to say and what not to say, the best way to talk about salary, and more. Use discount code NEWGRAD to get 50% off from 05/01/2024 to 06/30/2024.
moreover, CNBC Make It Newsletter Learn tips and tricks for success in work, money and life.
