Retire at 59? Here’s why Gen Z is ‘confident’ they can do it

New data from Northwestern Mutual’s 2022 Planning & Progress Study found Americans between the ages of 18 and 25 – Generation Z – hope to retire at about age 59, many years earlier than the generations ahead of them. By comparison, millennials expect to retire at age 61, Gen X at age 65 and Boomers at 71.

“It’s worth noting that the goal of retiring at 59 is ambitious,” says Josh Dorfman, financial advisor for Northwestern Mutual’s D.C. office. “That said, Gen Z has shown some pretty clear signals that they’re diligent and disciplined, so setting an ambitious goal is great.”

For example, members of Gen Z were the most likely to build savings during the pandemic, the report found. The research indicated 70% of Gen Z adults reported higher savings during COVID-19, compared with 61% of millennials, 50% of Gen X and 62% of baby boomers.

Employers and advisors can be helpful in this process, noted Dorfman. For employers, it’s important they communicate with their people about all their workplace retirement plan options, he said. Educating young employees from the get-go about things like how to set up automatic contributions, make the most of any employer match programs, and evaluate in-plan investment options can go a long way.

From an advisor perspective, it’s important that they have a deep understanding of their Gen Z clients and be responsive to their specific needs and wants, says Dorfman. The good news is that Gen Z are looking for help. The study found that they were the most likely to seek professional help over the past two years with three in 10 (29%) saying they didn’t have an advisor before the pandemic but have either started working with one or plan to moving forward.

“Recognizing that Gen Z has ambitious goals to retire relatively young is useful information for advisors,” says Dorfman. “It will take both a long-term strategy and a more short-term tactical game plan to make sure smart financial decisions are made throughout these clients’ lives. That includes everything from retirement planning to day-to-day budgeting and everything in between. Advisors can play a critical role in helping their clients strike the right balance between saving for the long term and addressing other financial priorities along the way. Ideally, that should also include enjoying the ride and not just exclusively focusing on the future.”

Related: Millennials say they need $1.8M to retire (Gen Z, $1.4M) – both want more 401(k) options

The study also found this generation is confident about their careers and in their ability to achieve financial security. Nearly 80% of Gen Z respondents said they expect to have a successful career and 70% said they expect to achieve long-term financial security. In addition, 55% of young adults said they expect Social Security to be there when they need it, compared with 52% of millennials and 43% of Gen X, according to the study.

“I thought it was interesting that Gen Z outpaced millennials and Gen X both in terms of their confidence toward achieving long-term financial security (70%) and certainty that Social Security will be available when needed (55%),” says Dorfman. “There’s an optimism there that I find impressive, especially when you consider that Gen Z hasn’t been spared from uncertainty over the last few years. Remember, they joined the workforce just before the COVID-19 pandemic hit. That’s a pretty traumatic event given it occurred early in their income-earning years.”

The fact that Gen Z responded to COVID-19 disruption by saving more and seeking out financial advice demonstrates rigor in the face of that trauma, says Dorfman.

“That combination of optimism and rigor is a great starting place for advisors to embark on a lifelong working relationship with Gen Z, and to help them achieve the ambitious goals they have set for themselves,” he said.

The findings don’t spell overconfidence, however. Nearly three-quarters of Gen Z adults indicated their financial planning needs improvement, on par with millennials and only slightly higher than 69% of Gen X respondents who say their financial planning could use some help.

The Gen Z cohort also was more likely to say they struggle with mental health challenges than any other group surveyed. The study found that 44% of Gen Z reported their mental health as weak or very weak compared to only 26% for all U.S. adults.

While Gen Z is looking forward to an early retirement, money is not what drives most of them at work. Nearly two-thirds said personal fulfillment is more important in a career than money, according to the study.

Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel.