Planning from a young age goes a long way to ensuring a comfortable retirement. But when the goal is so far down the road, it can be hard to know exactly what you should be planning for and how much you’ll actually need.
In a 2022 study from the Transamerica Center for Retirement Studies nearly three-quarters of Gen Zers said they were confident they’d be able to fully retire and live comfortably. To achieve that, they believed they’d need to have saved a median of $200,000. In contrast, Baby Boomers and Gen X, the two age groups closest to retirement, reported needing a median of $500,000 — more than double what the younger generation projected.
While members of Generation Z (those born from 1997 to 2012) might be unrealistic about how much they need to maintain their lifestyle in retirement, another fact highlighted in the study shows they are on the right track. Among those Gen Zers surveyed, 67% are already saving for retirement and started doing so at age 19.
That early saving habit will serve them well in the future, say several retirees and retirement advisors. Here’s what else people who are in or entering retirement now have to tell Gen Z about planning for retirement.
Start Saving Now
Because retirement is decades away for most Gen Zers, planning for it might not be a top priority right now. But those who start saving early, continue saving, and invest in interest-bearing options will benefit from the compounding effect over time. Compounding happens when you earn interest on both your original investment and the amount added by ongoing interest. (Use the U.S. Securities and Exchange Commission’s handy Compound Interest Calculator to project potential growth.)
“Time flies. Don’t miss out on the opportunity it offers. With saving, that means starting early. Time and compounding will do the heavy lifting,” says Joseph Montanaro, 58, a financial planner and relationship director with USAA’s Military Advocacy Group.
When investing retirement savings, consider how much risk you can tolerate, too. Retiree Jerry Hurley, 79, notes that investing conservatively helped make it possible for him and his late husband to continue their travel-loving lifestyle comfortably after retiring at 60. “We were very conservative. That’s been our secret. We’ve never lost money,” he says.
Looking ahead and saving for it gives retirees-to-be more options in retirement, too, says retiree Terry Congdon, 65. “Being financially self-sufficient is so freeing. If you scrupulously plan for retirement and save more than an adequate amount, you will have options,” he notes. One of them is the potential for retiring before full retirement age. Congdon retired at 63, while his wife, Marilyn, left the workforce at 60.
Talk to a Pro
While 29% of Gen Zers who participated in the Transamerica Center study said, they had consulted a financial planner, Joe Casey, 66, host of The Retirement Wisdom Podcast and the author of “Win the Retirement Game: How to Outsmart the 9 Forces Trying to Steal Your Joy,” would like to see that number increase.
“Find the right financial advisory resource for you. Start with a CFP (certified financial planner) who can give you a good sense of the numbers and help you build a roadmap,” he says. Casey recommends starting at Wealthramp, a site that vets financial advisors and offers recommendations.
Retirement coach Sandra Menzies, 55, agrees, adding, “Talk to a financial planner to understand how much money you will need to be able to live the lifestyle you want.”
Decide How (and Where) You’d Like to Live in Retirement
“I’ve had clients who did not think [in advance] about what they wanted to do in retirement, so they did not save enough money to allow them to do those things,” cautions Menzies.
Hurley enjoys taking a couple of cruises every year, while Congdon spends plenty of time with a fishing pole in his hands. “I fish a ton. That’s a pre- and post-retirement passion,” he says.
Hurley and his husband also thought about where they wanted to live post-retirement. Worn down by Connecticut’s often harsh winters, they used Elderhostel (now Road Scholar) educational travel programs to investigate warmer regions in the U.S. The pair eventually left the Northeast for Las Vegas.
Plan for Longevity With Healthy Habits Now
While longevity calculators based on lifestyle and family history can help predict how long you might expect to live wherever you decide to retire, good health and longevity aren’t guaranteed. Those in Gen Z can work toward experiencing as many of their bucket list adventures as possible, though, by discovering and embracing healthy habits now
This is especially important for more than lifestyle reasons. Poor health can also drain retirement savings. “Medical expenses are the largest unknown outlay during retirement. Start exercising and eating healthy now so you minimize health-related medical expenses later,” says Menzies.
“One of the things that I have seen working in this space and just living life is that money is important, but good health should be priority number one. Do what you can to create a positive outcome on that front, and you’ll go a long way towards ensuring a ‘happy’ retirement,” says Montanaro.
Planning for the future is important, but while doing so, be sure to make the most of life now, too, experts say. “Don’t defer your dreams until you retire. Live life fully and invest in and savor the meaningful life experiences that matter most, which often don’t involve much in the way of expenses,” says Casey.
But while doing so, keep saving for retirement.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.