Generation Z is known for their confidence, but a recent survey shows they may be overly optimistic about their retirement. According to a study from Northwestern Mutual, Gen Z expects to retire at 60 and live to 100, needing only $1.2 million to fund their 40-year retirement. However, financial advisors warn that this could be a rude awakening for those who don’t adjust their outlook or preparations. While 2 in 5 Gen Zers think they’ll live to 100, only 15% expect Social Security to deliver retirement income.
The survey found that while almost two-thirds of Gen Z “expect to be financially prepared for retirement,” they have only saved an average of $35,800 so far. In contrast, 52% of unretired baby boomers, 45% of Gen X, and 54% of millennials are optimistic about their retirement preparedness. However, financial planners are concerned about the total amount Gen Z thinks they need to save.
Financial planners believe that the $1.2 million Gen Z estimates they need to save for retirement is not enough to live comfortably for 40 years, especially when accounting for rising medical expenses and inflation. Linda Farinola from Princeton Financial group says someone who wants to live off $4,000 a month after taxes for 40 years would need closer to $4 million, accounting for 3% inflation and a return on invested retirement funds of 6%.
Despite this, experts say there’s no need to burst Gen Z’s retirement bubble. Instead, they should meet with a financial advisor to come up with a plan tailored to their individual needs. The Northwestern Mutual study found that “people who identify as disciplined financial planners knock two years off their retirement age,” while “non-planners add two years.” A planner can help Gen Z navigate goals like starting a family, putting their kids through school, and retirement.
In addition to saving in a traditional or Roth IRA and a 401(k), Gen Z should consider other investments like real estate that provide cash flow, says Asim Hafeez, owner of Empower Energy Solutions, a financial planning firm. Kashif Ahmed, president at American Private Wealth, emphasizes that saving for retirement requires hard work, diligent saving, and proactive planning. He advises Gen Z to “look at the squirrels during late summer and early fall” and save for retirement like the squirrels save nuts for winter.
Original Story at finance.yahoo.com – 2023-06-25 15:30:42
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