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How Millennials and Gen Z are rethinking retirement

Faced with economic, political, and societal turbulence, many young people are redefining what retirement looks like and how they want to get there.

6 min read

When it comes to saving for retirement, Millennials and Gen Z can’t seem to catch a break. While Millennials are often branded as being frivolous with their money and allergic to saving, Gen Z is heralded as being either the hands-down best or the absolute worst at saving for the future. Confused? You’re not the only one! 

Part of the issue is there isn’t actually a one-size-fits-all approach to saving for retirement. And these days, younger generations are getting creative with how they plan to enter their golden years. Here, we take a look at the financial picture that Millennials and Gen Z are facing — and how they’re reframing retirement.

The Gen X and Boomer path to retirement — a thing of the past?

For many Millennials and Gen Z, the traditional retirement wisdom that worked for older generations is simply outdated. Where job security and employer-sponsored pension plans helped many Gen X and Boomers attain a comfortable retirement cushion, today’s younger generations don’t necessarily have access to such benefits. A lack of job security coupled with the popularity of switching career paths means that employer benefits don’t translate the way they once did.

That’s not the only thing hindering Millennial and Gen Z retirement plans, though. Over the past 40 years, wages have flatlined, housing costs have doubled, the pandemic derailed Gen Z’s entrance into the labor market, and the cost of living skyrocketed. It’s no wonder that nearly 50% of young adults in the United States aged 18-29 still live with their parents and 37% of Millennials cite housing costs as the number-one reason they’re unable to save for retirement. 

For some, saving for the distant future has become a luxury they simply can’t afford. But although the traditional model might not be an option for everyone, resourceful Millennials and Gen Z are finding different ways to approach their retirement.

Rethinking retirement as a Millennial

Entering the job market hot on the heels of the dot-com crash and the Great Recession, Millennials came of age in an era of financial uncertainty. However, it’s not all doom and gloom for Millennials: They’re technologically adept and have more entrepreneurial drive than previous generations. Many Millennials are wary of the stock market — having only experienced extreme market volatility and not the booming markets of the ‘80s and ‘90s — but nevertheless, 80% of people aged 18-35 are investing

Common wisdom suggests that investing in the stock market early is the best way to secure a stable financial future, thanks to the power of compound interest. But unlike previous generations, many Millennials are rethinking their path to retirement — and what being retired may look like for them. According to a study by Schwab, Millennials would rather use their savings to pursue their desired lifestyles, to travel rather than own a home, and to enjoy new experiences instead of steadily saving for a traditional retirement. Essentially, many Millennials aren’t waiting for the delayed gratification of retirement — they want to enjoy their life along the way, too.

Granted, with major financial barriers to home ownership and traditional pensions, this flexible approach to retirement has partly grown out of necessity, not just choice. It’s not surprising that 61% of the older Millennial cohort (those born between ‘81 and ‘88) say that they’ll likely either take on a second job or pick up a part-time job during their retirement years. Then again, this may also be more aligned with Millennial values, like having new experiences and contributing positively to society.

Gen Z’s approach to retirement: data still unclear

Data on how Gen Z is approaching retirement is often polarizing and contradictory. On the one hand, they’re lauded for saving more for their retirement than any other generation, stashing away 14% of their income on average, compared to 12% among older generations. Gen Z is also the most confident of any generation that they’ll have enough money for their retirement, with 30% of this cohort actively prioritizing their retirement savings. One possible explanation for Gen Z’s proactive approach is that many of them grew up in households that weren’t relying on traditional retirement wisdom. Instead, the focus was placed on doing it yourself and saving early. 

On the other hand, over 30% of Gen Z have no retirement savings to speak of. With the turbulent job market in the wake of the COVID-19 pandemic, many young people have struggled to make ends meet, let alone make contributions towards their retirement funds. Plus, with soaring inflation and cost of living, it’s unlikely that a large portion of Gen Z will be able to get their foot on the retirement savings ladder for the foreseeable future. 

Alternative ways to get to retirement

According to research by the managing director of J.S. Retirement Consulting and academics at Stanford and George Mason Universities, some may benefit from turning the traditional retirement savings model on its head. The “life-cycle” approach to retirement saving suggests that you should only start saving for your retirement when you are relatively well off, so you don’t have to put too much aside when you can’t really afford to. Instead, early on in your career, you should use your income to improve your standard of living.

Rather than taking a linear approach to retirement saving, the life-cycle model looks at your projected total available income over your lifetime. But this model does come with some risk. For instance, it doesn’t account for people whose wages don’t continue to grow, who lose their jobs, or who switch to a less lucrative career path. Fluctuations in social security benefits could suddenly leave certain individuals at risk if they don’t have a savings safety net. Plus, social security systems across different countries offer very different levels of financial support.

Learning to save: an important life skill

When it comes to saving for retirement, it can be easy to fall into a doom spiral if you feel like you’ve fallen behind an arbitrary benchmark or expectation. But don’t despair! Even Millennials who are now in their early 40s still have 20–30 years to finesse their game plan. The reality is that retirement will likely look different for everyone. Some younger individuals may plan to only semi-retire and take a part-time job in their later years, and some Gen Zers are saving large portions of their salary now so they can quit work completely in their 50s. 

Wherever you are financially, one of the most important skills you can develop over your lifetime is learning how to save on your terms. This usually starts by getting a solid understanding of your incoming and outgoing cash flows and setting up a basic budget. Regularly putting some money aside each month, no matter how small, can help you lay the groundwork for tackling larger financial goals such as creating an emergency fund, getting out of debt, and saving for retirement


Your money at N26

N26 offers a simplified and stress-free way of managing your money. With Spaces, you can create multiple dedicated sub-accounts next to your main bank account, making it easier to reach your financial targets and savings goals. Plus, thanks to instant push notifications each time money enters or leaves your account, staying up-to-date with your finances has never been simpler. You’ll also gain a deep understanding of your spending habits with Insights and get a monthly snapshot of your financial health with your Monthly Wrap-Up. Find the right account for you.

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