Meet the Gen Zers maxing out their retirement savings: ‘It’s no longer chasing money; it’s chasing time’

Cnbc ^ | 29th may 2024 | Jennifer lu

[Cronos]

Lillian Zhang wasn’t even out of college before she started planning for retirement.

Zhang was 20 years old when she opened her first retirement account, a Roth IRA, after learning about them from personal finance Youtube channels. She maxed it out for two years using money from her savings and summer internships, and when she got a job after college, switched her focus to maxing out her 401(k).

Zhang, now 24, now has six figures stashed across three different retirement funds. (She recently opened a Simplified Employee Pension, or SEP, IRA for her side hustle as a content creator.)

And she’s part of a growing class of Gen Z retirement super-savers.

Today’s young professionals are prioritizing their golden years like never before: The average Gen Zer starting saving for retirement at age 22, compared with millennials who started at 27, Gen Xers who started at 31, and baby boomers who started at 37. That’s according to a January survey of 4,500 U.S. adults from Northwestern Mutual.

So what’s pushing young people to stash away money they can’t touch for decades?

Anxiety is one big driver. Many are concerned about stagnating wages in an era of skyrocketing costs of living, says Paloma Thombley, chief human resources officer at Handshake, the jobs site for college students and new grads.

Americans estimate they need to save $1.46 million to live comfortably in retirement, up 53% from 2020, according to Northwestern Mutual.

[Cronos]

“People expect their career journey will look different from their parents,”

“A lot of people think saving toward retirement means you don’t get to enjoy life right now,” she says. “Even though I’m aggressively saving for retirement and investing in real estate, I live a life I love.”

She sees her retirement goals as a redefining her own American dream of “having your time back and not making someone else rich.”

That might mean building her own business or passive income streams rather than working a corporate job. Plus, Hinckley adds, “I don’t want to wait to do [my hobbies] when I’m 70.”

[Jonty30]

Won’t they be surprised that they won’t have any retirement.

[SaveFerris]

Yep. And that whatever IS there will be under lock and key by whatever government until you submit to the Mark of the Beast in order to BUY and SELL.

Can't happen?

Look how quickly the Covid-19⁽⁸⁴⁾ lockdowns happened - WORLDWIDE - and they were shutting down churches, restaurants, businesses.....in VERY short order. Food was stripped from the shelves locally.

No beef, chicken, canned vegetables, canned soup, bread (except overpriced stuff, no milk, no eggs. For weeks and weeks. I used to take pictures of the shelves because it was so shocking to see. I had predicted that one disaster would clear the shelves in 24-72 hours at most. And it happened.

[jdege]

$100 placed at 7% interest compounded quarterly for 200 years will increase to more than $100,000,000 -- by which time it will be worth nothing.
    -- Robert Heinlein

[C210N]

Won’t they be surprised that they won’t have any retirement.

So what’s pushing young people to stash away MONEY they can’t touch for decades?

Gonna be surprised to learn that their saving "money" was at more basic level, really just saving debt. Dollars in a Roth/IRA/SEP is debt because what they refer to as 'money' is printed fiat, or in the case of these accounts, fiat in a ledger account.

To save real money means realizing PMs should be a bigger part of your savings. Every fiat or instrument of fiat are substitutes for PMs.

I don't mean to say that in today's world fiat in Roth/IRA/SEP doesn't have any place... just be aware that our debt-based currency has been inflated to near zero ($1 in 1913 is now 3 cents).

[C210N]

Exactly!

(as in the previous reply)

[EQAndyBuzz]

““A lot of people think saving toward retirement means you don’t get to enjoy life right now,” she says.”

My son is 28. We encouraged him to start saving when he got his first job. That was at age 13. He now has a real estate investment property, lives on his own and travels to see friends and family all over the world. He is truly living his greatest life.

[Sir_Humphrey]

It’s funny. Young people doing the right thing by saving for retirement most likely because they know SS won’t be around for them. One might think on this forum they would be applauded for doing a very conservative thing but I guess not.

[Uversabound]

I did not make a lot of money yearly my yearly salary at the last year of my work was $65,000 a year which in New York is really not lot. I did however, start saving in my 401(k) when I was 22 and I bagged lunch most of the time eating out, for example for lunch every day is very expensive, Dom and I did not always go on vacations when we first got married and we were careful with our budget the time I retired in 2021 early, I had just over $1 million in the bank there too. Dom takes home enough from his retirement and his pension that we are able to live on that the two of us pretty comfortably am I out buying jewelry and lots of clothes every week every month I’m happy with what I have. It’s all in your and your perspective on life I cook, etc. etc. we eat out but not all the time

I’m preaching to the choir here, but it’s all in how you live your life and your habits. I have a credit card with a $1500 limit that we use in case we need extras and I pay it off every month no debt

[Tell It Right]

One might think on this forum they would be applauded for doing a very conservative thing but I guess not.

My thoughts exactly! My guess is that the FReepers who are Debbie Downers on this topic are embarrassed that they didn’t do the same.

[Jonty30]

I think it’s great that they are doing it. Best time to work two jobs and invest and save as much as you can is in your 20’s. You can, not unreasonably, become worth about $10 million if you do it that way.

I just think the government will steal their wealth. The debt must be paid and it will be paid.

[Does so]

I think it was said that the stock market pays a minimum of 5% a year in conservative portfolios.

[DeplorablePaul]

Time passes very quickly. I thought I would never make it to retirement yet here I am. Investing for retirement is one way to beat inflation. I would recommend that this girl buy a house though. A house is a very good way to accumulate wealth.

[Z28.310]

Speaking with my advisor during our last quarterly phone call, he complained that I should be back in the market, rather than settling for over 5% (which is compounding, because I very rarely touch the principle, or the gains, as I’ve cut back on expenses) and that I wasn’t keeping up with inflation.

I replied that real inflation, on real life items, is nearer to 18% and then asked him how many of his clients were earning over 18%. His reply, after a moment of silence; “None. That is a very high risk investment scenario. Nobody that I know of is earning over 18%, or anywhere near that”. Naturally, his firm wants him to sell certain investments for the firm to profit, but this isn’t my issue.

As a retiree, this is not the season of life for such high stake risks and NONE of the other clients are willing to take these risks.

[Alberta's Child]

Saving for retirement is a good thing, but HOW you save for retirement is a topic worthy of discussion. Personally, I don’t think it’s always a good idea to max out your retirement plan contributions at a young age. At a bare minimum, it’s generally a good idea to allocate enough money to a company-sponsored 401(k) plan to qualify for the maximum company match. That’s free money, and should not be dismissed lightly.

Beyond that, I believe young people should focus on investing OUTSIDE a retirement plan, and on investing in themselves by learning valuable skills that will pay off better in the long run than traditional retirement savings.

[hinckley buzzard]

Some folks just can’t tolerate the idea that other especially young people can make better decisions than they did. IDK how representative the kids in these anecdotes are, but good for them. Self-reliance, saving on one’s own and not relying on the government seems quintessential conservatism to me.

[Tell It Right]

We're talking about two opposing forces regarding retirement investment planning. One is to be aggressive enough to at least try to keep up with inflation. The other is to have a dependable retirement stream of income.

My solution to that is being spread out in over 40 mutual funds of different asset classes. About 25% of them are in bonds/treasury/money market asset classes. The other 75% of them are in equity asset classes.

Having your equity assets spread around in 30 asset classes mitigates the risk. Having 25% in bond asset classes gives you 6 years of annual withdrawals (assuming a 4% withdrawal strategy) in case the entire stock market goes down (the few times that happens) so you won't have to withdraw from the equities mutual funds while they're down. Basically, when you do your annual (or quarterly, or monthly) withdrawal, you log into your portfolio and withdraw from whatever mutual fund has the highest balance (sell high). Even in a market downturn, there's almost always an equity mutual fund that's high if you're spread out among many asset classes.

By being in 75% equities instead of 50% equities, your portfolio grows faster (enough to keep up with inflation?, depends on which years). By being spread out among 40 asset classes (30 in equities), you always have something that's up.

[NWFree]

My kids are doing this especially my daughter. I’m not too crazy about some of their investment choices like Bitcoin but they have normal investments too

[Antoninus]

Beyond that, I believe young people should focus on investing OUTSIDE a retirement plan, and on investing in themselves by learning valuable skills that will pay off better in the long run than traditional retirement savings.

I agree with this. In mid-life, I suddenly realized that I had a lot of money socked away in a 401K which I would have trouble getting at if it was ever needed. I had comparatively little in liquid cash. So I decided to scale-back the 401k additions the amount needed to maximize the company match--and put the rest into a brokerage account. Now, that money is available for investment, home improvement, new vehicles when needed, etc. and is collecting about 5% in interest.