Study finds Gen Z plans to retire earlier than preceding generations

By Ayo Mseka

The nation’s youngest adults are taking significant steps to improve their financial wellbeing, with the goal of retiring at age 59 – years ahead of the generations that preceded them.

New data from Northwestern Mutual’s 2022 Planning & Progress Study revealed that Americans between the ages of 18 and 25 – known as Gen Z – were the most likely to build savings during the pandemic and begin working with an advisor. The study also showed that these young adults were more confident about their careers and in their ability to achieve financial security.

There are likely several factors at work when it comes to why Gen Z seems to be more confident in their ability to achieve financial security than other generations, explained Charlie Burns, financial advisor with Northwestern Mutual in Portland, Oregon.

'Benefit of time'

“First and foremost, they have the benefit of time. Members of this age group are at the very beginning stages of their careers, so they have plenty of time to get a financial plan in place and start building healthy, lifelong financial habits. It therefore makes sense that this group would feel particularly well-positioned to attain financial security,” Burns said.

It’s also notable that Gen Z joined the workforce just before the COVID-19 pandemic hit, added Burns. So, they have already lived through a time of great economic uncertainty early in their income-earning years, which appears to have served as a wake-up call for many of this generation to start taking significant steps to improve their financial wellbeing.

For example, the study found that Gen Z is the most likely among age groups to say that they’ve built savings during the pandemic, and the most likely to have started working with an advisor over the last two years.

But contentment is elusive for quite a few of Gen Zers, the survey pointed out. In fact, their assessment of their own mental health stands out as considerably more fragile than all other age groups. The study found that 44% of Gen Z reported their mental health as weak or very weak, compared to only 26% for all U.S. adults.

How can financial advisors help?

With so many of Gen Z planning to retire at such an early age, what are some of the steps advisors can take to help them achieve this ambitious goal?

The first step to reaching any financial goal, such as retirement, is to put a plan in place that accounts for your full financial picture and will ensure you stay on track to meet that goal through any kind of market cycle, said Burns.

Advisors can be very helpful in this process, added Burns; so, it’s encouraging to see that Gen Z were the most likely to seek professional help over the last two years – with three in 10 (29%) saying they didn’t have an advisor before the pandemic, but have either started working with one or plan to, moving forward.

Advisors can help continue that positive momentum and help Gen Z reach their goal of retiring by age 59 by identifying and executing on smart money decisions at every stage of their clients’ lives.

According to Burns, this includes everything from:

Putting an initial retirement plan and budget in place that accounts for your unique financial needs and wants --to helping you strike the right balance between saving for retirement and addressing other financial priorities along the way (such as paying off debt, funding education expenses or accounting for healthcare costs).
Helping you maximize other sources of income, such as Social Security and investments, to ensure you won’t outlive your savings in your retirement years.The 2022 Planning & Progress Study was conducted by The Harris Poll on behalf of Northwestern Mutual and included 2,381 American adults aged 18 or older, with oversamples of Gen Z, who participated in an online survey between Feb. 8-17, 2022.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].