:max_bytes(150000):strip_icc()/GettyImages-2216867277-79a52f1a490540e1896752e3af4e2de8.jpg "Gen Z Shares Ideal Retirement Age but Admits They Will Work Far Beyond It")
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Key Takeaways
- Gen Z’s ideal retirement age is 59, but they expect to retire at 67, reflecting a gap between aspiration and expectation seen across generations.
- Compared to Baby Boomers at the same age, more Gen Zers have access to defined contribution plans like 401(k)s.
- New 401(k) features and starting to save earlier can help younger generations build larger nest eggs compared to older age groups.
While Gen Z dreams of an early retirement, they’re not expecting it.
Gen Z’s ideal retirement age is 59, according to a new survey from Manulife John Hancock Retirement, an insurance company.
However, this generation, which includes people aged 18 to 28, actually expects to retire much later, at age 67. A similar trend occurs across generations—peoples’ ideal retirement ages were younger than their expected retirement ages.
Millennials, who are aged 29 to 43, want to retire at age 61, but don’t expect to retire until age 69.
What This Means For You
All generations want to retire earlier than they expect to. For Gen Z, the gap between their ideal and expected retirement ages is the largest, but thanks to increased access to workplace retirement plans and investing early in life, they could be better prepared for retirement than older generations.
Despite Gen Z and Millennials’ less-than-optimistic retirement outlook, they may be more prepared for their golden years than they think.
A Vanguard analysis found that of all the generations, Gen Z and Millennials had the greatest proportion of people who were considered prepared for retirement.
As pensions have fallen out of vogue in recent decades, Gen Z today is more likely to have access to defined contribution plans like 401(k)s than Baby Boomers did when they were young.
In other words, access to workplace retirement plans makes younger generations more likely to save for retirement.
Other factors are working in younger people’s favor, too. For example, 401(k) design has changed since the 2000s.
Due to legislation passed in 2006, 401(k) money can now be automatically invested in what is known as qualified default investment alternatives (QDIAs).
When a plan sponsor designates an investment option as a QDIA, contributions by an employee who does not select investments are automatically invested into a QDIA. Plans often choose a target-date fund, balanced fund, or a professionally managed account as a QDIA. Those types of funds put one or more professional investment managers in charge of picking securities like stocks and bonds for the fund. That relieves the worker who owns the account—but who may not want to make such decisions—from having to choose what to invest in.
Additionally, saving for retirement early can make a big difference for young people. This group has a longer investment horizon and can benefit more from the power of compound interest. (Compound interest is interest earned on your contributions plus the interest and other earnings you’ve already accumulated.)
Let’s say a 25-year-old starts from scratch. They invest $500 at the beginning of each month and earn 8% annually on their investments. At age 65, this investor would have more than $1.6 million. In contrast, someone who starts investing at age 45 would reach age 65 with roughly $286,000, under the same assumptions.
