Clients Could Need $1.26M to Retire. Gen Z Has a Plan

Gen Z’s got that bag when it comes to retirement savings, but it sounds a little sus. (Translation: Young Americans are confident about their retirement readiness, but there are caveats.)

Americans now believe they will need $1.26 million to retire comfortably, according to a Northwestern Mutual study. While it’s $200,000 less than what people thought they would need for retirement just a year ago, it’s still high. And unfortunately, Americans’ confidence in reaching that goal is quite low, with more than half believing they are at least somewhat likely to outlive their savings. 

But Gen Z offers a glimmer of hope, as the young cohort tends to start investing at just 24 years old compared with almost 40 for boomers, the study found. Not only does that provide greater stability, but it’s a reminder to advisors that they need to be actively engaging with and ultimately courting the next generation of clients. “You need to position yourself as a family advisor, and not just take care of Mom and Dad,” said Scooter Thomas of Savant Wealth.

Kids These Days

Whether it’s the rise of cryptocurrency, the thrill of meme stocks, or the occasionally questionable financial tips on TikTok, today’s young people are constantly exposed to the allure of investing, said Kyle Menke, an advisor at Menke Financial, part of the Northwestern network. “These ultra-high-risk approaches piqued their interest in building wealth, and it has them asking questions about proven ways to do it,” he told Advisor Upside, adding that the average age of a new Northwestern client is just 31. 

Gen Z is also benefiting from businesses auto-enrolling employees into retirement programs, Menke said. As a result, Gen Z feels the most confident in their ability to save for retirement: 

• Some 63% of Gen Zers think they will be financially prepared when the time comes, Northwestern found. In contrast, only 46% of Gen Xers think they will be prepared for retirement.
• Zoomers plan to exit the workforce at 61, and more than a third believe they will live to 100 years old. 

Glow Up. So that means many younger Americans are essentially preparing for 40 years of retirement. Yo, bet? (Translation: Are you sure about that?) Gen Z is just not taking into account how much things cost, Thomas said. 

“Most Gen Zers are not old enough to have kids or their own home,” he told Advisor Upside, adding that those expenses plus Netflix subscriptions, regularly eating out, and a whole hosts of other lifestyle costs can easily top $100,000 a year, “Forty years of retirement is a fun thing to think about, but they don’t have their arms wrapped around it fully yet.”