A split between generations of Americans is beginning to form when it comes to saving for retirement.
According to the upcoming Center for Generational Kinetic’s (CGK) Annual State of Gen Z study, details of which were shared with Yahoo Finance, 70% of Gen Z respondents (aged 10-25 years) stated that it's important to invest now so they can retire in the future while 45% of millennials (aged 26-41 years) are putting off saving for retirement.
“What our research shows in multiple studies is that Gen Z is actually saving money," Gen Z Researcher Jason Dorsey told Yahoo Finance (video above.) "They're trying to hold on to the money that they were going to spend. It's very, very shocking, particularly when you compare it to millennials.”
If current trends continue, he added, "millennials and Gen Z are going to be set up very differently when it comes to retirement. ... We actually are very optimistic about Gen Z being able to retire one day, much less optimistic about millennials being able to retire one day.”
'The fragility of employment became very, very real'
Millennials have lived through two major recessionary events during prime earning years: first the Great Recession in the late 2010s and now the pandemic-induced recession in 2020.
“There's a lot that's happened with that generation — my generation — including crashing to the Great Recession and then COVID,” Dorsey said, noting that millennials put off purchases like buying a home amid the economic turmoil.
And although some millennials are in their 40s and have recovered from the 2008 financial crisis in terms of employment, they haven’t in earnings, according to analysis by the Washington Post.
That doesn't necessarily mean that Gen Z has gotten off easily.
Dorsey pointed out that Gen Z was the No. 1 generation to lose their job during the pandemic, which he said was "a big deal."
“They had the least leverage or relationships in their work environment," Dorsey explained. "They disproportionately worked in retail, hospitality, all of these industries, like food service, that had mass layoffs. So Gen Z was coming right into age, right into the workforce, and then they lost their jobs."
Consequently, "it changed how they view work going forward, how they view savings, retirement, and so forth,” he added. “The fragility of employment became very, very real to them.
According to Dorsey, part of the reason behind Gen Z's changed attitude around saving comes from seeing their parents, Gen X, struggle. Not wanting "to end up like millennials" was another reason why Gen Z has prioritized employee benefits — especially employer retirement matching — when looking for jobs.
And notably, a majority of working-age Gen Zers "do not believe that Social Security will exist for them in a form that will actually take care of their needs," Dorsey said, "which, again, speaks to why they're taking action speaks to why they're taking action now to save, invest, and think about these types of benefits."
Gen Z spent the pandemic 'learning about crypto'
While the pandemic accelerated Gen Z's focus on saving, it also may have increased the younger generation's appetite for risky assets.
For instance, Dorsey's research found that 41% of Gen Z thinks cryptocurrency is a safe investment.
"Remember, lots of Gen Zers were home. They're all learning about crypto. They were using checks if they received them to put into that," Dorsey said. "And so that did shift as well, in addition to just their predisposition to want to save and invest relative to other generations."
Despite still having the benefit of time and optimism in the American dream, Dorsey's research indicated that Gen Z is still preparing for tough times, including retiring at later dates.
"What we are seeing is even though they are saving at a better rate than they thought, the reality of them being able to retire at 55 is probably pretty low," Dorsey said. "However, I would say it's much more likely than for many millennials, who are very far behind the curveball, if you will, in terms of how much they need to be able to save in order to be able to retire in 15 or so years."
Edwin is a producer for Yahoo Finance. You can follow him on Twitter @Edwin__Roman.
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