Summary
Gen Z and millennials need between $3 million and $5 million in retirement savings due to inflation.
Facts
- Gen Z and millennials need $3 million to $5 million for a comfortable retirement due to inflation.
- More than 7 in 10 investors believe that $3 million to $5 million is the ideal retirement savings target.
- The rise in inflation has led to a three- to five-fold increase in the recommended retirement savings target.
- Managing towards an unknown future, including uncertain prices and lifespan, adds to retirement anxiety.
- Bloomberg customers, who have high incomes and careers in finance, were surveyed for the study.
- The US government debt will increase by $5.2 billion per day, adding to the need for increased savings for retirement.
Gen Z and millennials need to save between $3 million and $5 million due to inflation, which has led to a three- to five-fold increase in the recommended retirement savings target, according to a Bloomberg study.
Canadian millennials, especially homeowners, are expected to face significant economic damage and high interest costs in the coming months due to rising interest rates, according to a report by RBC, leaving them vulnerable to job losses and straining their high levels of debt.
Almost half of Generation Z adults and 39 percent of millennials do not expect to receive any Social Security benefits they have earned, according to a survey by the Nationwide Retirement Institute, with concerns growing over the program's insolvency within the next decade.
Individuals between the ages of 40 and 59, known as Gen X and younger baby boomers, experience the most stress and struggle with managing the concept of longevity, making it crucial for them to start planning for their future and seek guidance from financial advisors, according to research from Transamerica and the Massachusetts Institute of Technology AgeLab.
The US experienced a significant decline in wealth last year, but millennials saw their net worth rise due to their higher investment in real estate, debunking the myth that they are financially struggling.
The average price of cars in America has risen recently, causing financial strain for Gen Z and millennials, especially due to rising interest rates and high levels of auto loan delinquency.
The aging population, particularly the baby boomer generation, is fueling the demand for housing, creating a shortage and making it more difficult for younger generations, like millennials, to buy homes.
Gen Z is more optimistic about homeownership than millennials, with a lower percentage believing it will be impossible in their lifetime, and while both generations face barriers to homeownership such as high home costs and student loan debt, Gen Z is doing a better job of saving and has a slightly higher rate of homeownership compared to millennials and Gen X at their age.
Millennials and Gen Zers are turning to side hustles and creative strategies, such as wedding gift registries, to save for down payments on homes amidst rising mortgage rates and high home prices, according to a Redfin study. However, many in these generations still face challenges in envisioning homeownership due to the perception of expensive homes and the inability to save for a down payment.
The resumption of student loan payments in October will add to the financial burden of Gen Z and millennial Americans looking to buy a home, further squeezing their ability to afford housing.
Approximately 75% of American workers earning up to $50,000 live paycheck to paycheck, while credit card debt has exceeded $1 trillion, making it difficult for those with debt to save; Gen Z saves more money than older generations due to their experience of the Great Recession, lack of trust in Social Security, and inclination to invest in cryptocurrency.
Baby boomers have benefited greatly from the Federal Reserve's policies, earning high returns on their investments while younger generations suffer from inflation and high costs.
High home prices and interest rates have created challenges for young Americans, but the boomer generation has benefited from high home prices and bond yields, making them less affected by the economic cons.
Young Americans face unprecedented financial challenges, with rising costs of housing, education, and childcare, as well as limited career advancement opportunities, causing many to believe that attaining the financial stability of previous generations is unattainable.
Many young adults, including members of Generation Z, are struggling to maintain good credit scores and are dedicating a significant portion of their disposable income to servicing their debts, which could hinder their ability to build wealth and save for retirement.
Young professionals, particularly Gen Z and millennials, are seeking more flexibility and work-life balance, which can often clash with the expectations of older generations; however, there is a common thread among all generations in valuing their personal lives outside of work.
Millennials who purchased homes and settled in the suburbs during the pandemic will face a financial burden as they will not be eligible for student loan relief, potentially leading to an increase in household bankruptcies, according to former Fed economist Danielle DiMartino Booth.
Older millennials, specifically those aged 35 to 44, are the least likely to feel financially secure, with 80% reporting high levels of financial stress due to factors like inflation, challenging economic circumstances, student debt, childcare bills, and soaring housing prices.
Millennials are being hit harder by elevated mortgage rates than other generations, as they were not able to take advantage of historically low borrowing rates during the pandemic, leading to increased mortgage debt and difficulty in entering the housing market.
The economic backdrop faced by Gen Z, including inflation and high living costs, is expected to have a deep impact on their pay expectations and spending habits, potentially pushing prices higher. Young people in the UK have seen their inflation expectations rise significantly, driven by experiences of a cost-of-living crisis during their formative years. This could have long-lasting psychological and economic effects on Gen Z and society as a whole.
Seventy-three percent of Gen Z consumers in the US have reduced their spending due to inflation, with many choosing to cook at home, spend less on clothes, and cut down on groceries, while older generations have increased their spending, according to a Bank of America survey.
Despite financial struggles and economic challenges, a study found that 80% of young Americans between 18 and 34 are optimistic about their financial future, with the majority believing they will be thriving in both five and thirty years. However, these adults face obstacles such as basic expenses and rising inflation, along with a lack of financial support and resources.
