Is Gen Z Falling Behind Already?

Episode 318 – Generation Z, born after 1996, is just getting started with their financial lives. How are they doing so far?

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Transcript of Podcast Episode 318

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, is Generation Z falling behind already?

Our youngest adult generation—Generation Z, or those born after 1996—make up 20 percent of the U.S. population.[1] In fact, they are expected to surpass the number of baby boomers in the workforce very soon, so their financial ideas and priorities are going to have a major impact on our economy. They are also considered the most diverse and educated generation we’ve ever had.[2]

But they grew up in a different world and thus have a different approach—both to finance and to life—than their older counterparts. Although they were very young when it happened, many Gen Zers have been influenced by 9/11, the Great Recession and Covid-19, perhaps more so than older generations, most of whom reached adulthood before then.[3]

Even though they’re just getting started, according to a survey by the TIAA Institute, when it comes to finances, they may already have some catching up to do. The TIAA Institute, based in New York City, is a think tank that hopes to “Enhance the financial security and organizational effectiveness of TIAA clients and society-at-large through standard-setting research and thought leadership.”[4] Their survey found that only 20 percent of Gen Zers are saving for retirement. Among those that do, 66 percent are doing so using 401(k) plans, which is the most popular option.[5]

There are plenty of reasons why so few have started saving for retirement. Among those most commonly cited are: a lack of knowledge about where to start, low income, procrastination, and high expenses or debt.[6]

Gen Z has developed some other unusual characteristics. For one thing, the majority of Gen Zers use only savings accounts to store their money.[7] Why? For a significant portion, it’s because they “lack knowledge on where to start.”[8] This is surprising considering that Gen Z is likely the first generation to grow up using cell phones from an early age. And through the use of mobile apps, investing in the financial markets has never been more accessible. Apps like Robinhood and others make it relatively easy—and inexpensive—to invest smaller amounts.[9] This is something that most of us never had when we were young.

Perhaps most startling, a growing number of Gen Z have indicated that they don’t expect to retire at all.[10] And if life expectancy continues to increase, these people will become more likely to live past age 100.[11] That’s a really long-term horizon.

Things could certainly change. After all, Generation Z is just getting started. Many, in fact, haven’t reached adulthood yet. The rest just haven’t had much time to save a lot of money.

What is the best way for their parents and advisors to address all this? One alternative may be to shift the conversation. Instead of talking to Gen Zers about retirement, perhaps their advisors should focus of financial independence.[12] This can help young adults gain a feeling of flexibility in their careers and family lives. It might also give them an incentive to start catching up on their savings and investments.

[1] Anne Ollen, Sofia Raymond, Steph Strickland, and Emily Watson. “From Gap Years to Golden Years: A Look at Gen Z’s Current Thinking on Retirement.” TIAA Institute, 2024. https://www.tiaa.org/content/dam/tiaa/institute/pdf/insights-report/2024-09/from-gap-years-to-golden-years_ollen-raymond-strickland-watson.pdf (accessed Jan. 3, 2025).

[2] Fry, Richard and Parker, Kim. “Early Benchmarks Show ‘Post-Millennials’ on Track to Be Most Diverse, Best-Educated Generation Yet.” pewresearch.org. https://www.pewresearch.org/social-trends/2018/11/15/early-benchmarks-show-post-millennials-on-track-to-be-most-diverse-best-educated-generation-yet/ (accessed Jan. 27, 2025).

[3] TIAA Institute. “From gap years to golden years: A look at Gen Z’s current thinking about retirement.” tiaa.org. https://www.tiaa.org/public/institute/publication/2024/gap-years-to-golden-years-gen-z-current-thinking-about-retirement (accessed Jan. 3, 2025).

[4] TIAA Institute. “Mission & Objectives.” TIAA.org. https://www.tiaa.org/public/institute/about (accessed Jan.27, 2025).

[5] Ollen et al, 3.

[6] TIAA Institute. “From gap years to golden years: A look at Gen Z’s current thinking about retirement.” tiaa.org. https://www.tiaa.org/public/institute/publication/2024/gap-years-to-golden-years-gen-z-current-thinking-about-retirement (accessed Jan. 3, 2025).

[7] Id

[8] Id

[9] Cummings, Shane. “How Gen Z’s Retirement Planning and Investing Are Different.” kiplinger.com. https://www.kiplinger.com/retirement/how-gen-z-retirement-planning-investing-are-different (accessed Jan. 10, 2025).

[10] TheStreet. “Only 20% of Gen Zers Are Saving for Retirement.” thestreet.com. https://www.thestreet.com/retirement-daily/saving-investing-for-retirement/only-20-of-gen-zers-are-saving-for-retirement (accessed Jan. 10, 2025).

[11] TIAA Institute. “From gap years to golden years: A look at Gen Z’s current thinking about retirement.” tiaa.org. https://www.tiaa.org/public/institute/publication/2024/gap-years-to-golden-years-gen-z-current-thinking-about-retirement (accessed Jan. 3, 2025).

[12] Id

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