Opinion: The best retirement investment strategy Gen Z can learn from baby boomers
Gen Z will soon overtake Millennials as the most populous generation on the planet, with more than a third of the world’s population Think of themselves as Gen Z. And this group is motivated to retire early, perhaps more so than any generation that came before it: One in five Gen Zers are considering early retirement. retire at 50and one in four plans to retire at 55. While this newfound optimism certainly fuels hope, it also raises the question: how?
With rising inflation, a changing workplace and competitive housing markets, the fact is that to capture early (or even often scheduled) retirement, investment portfolio diversification is becoming increasingly vital. . If Gen Z wants to achieve their audacious goals, they will have to do so with an eye on stable investments with long-term payoffs. Ultimately, to retire with $1 million (a reasonable nest egg) at age 50 would require investing $460 every two weeks or $12,000 per year (assuming 6% annual growth).
When it comes to planning for the future, the younger generation has ambitious goals. But are they being honest with themselves about what it takes to earn enough for retirement? Let’s see what younger generations can learn from baby boomers, today’s retirees, about preparing for retirement successfully.
A different mindset
According to a recent report by Fortunebaby boomers aren’t as keen on early retirement as Gen Z. Many baby boomers nearing retirement want to continue working, but with limited hours or less demanding roles.
Seventy-nine percent of respondents to the cited survey said they would be more likely to take part in semi-retirement with a limited work schedule, rather than leaving the labor market altogether. This is largely due to the concern of having enough financial security to stop generating income.
But while the Boomer generation is focused on income and building a solid nest egg for retirement, Gen Z values salary less than all other generations. According to a study conducted by Deloitte, while money and salary Is important to Gen Z, they also care deeply about work-life balance, flexible hours, benefits and benefits. And Gen Z feels they should receive all of these benefits from their employer in addition to monetary compensation.
The bottom line? While Baby Boomers are focused on earning the salaries they need to retire, given the choice between a better paying but boring job and an interesting and lower paying job, Gen Z is also divided on the decision.
This shift in attitude is occurring against a backdrop of crippling education costs: Gen Z places a high value on traditional four-year college degrees and is rapidly becoming the most educated and most indebted generation we have ever seen. So how will they achieve that retirement goal at age 50?
The case of real estate
Historically, real estate has proven to be the most profitable long-term wealth generator. The baby boomers know it well: they have surpassed the silent generation by holding the most real estate wealth of any generation over the past 20 years. Baby boomers held 44% of real estate wealth in 2021, compared to 31% of Gen X, the next wealthiest generation.
The majority of Gen Z seek investment advice on Instagram (57%) and TikTok (52%) according to recent research conducted by Qualtrics on behalf of Credit Karma. Are they missing that age-old advice, the one baby boomers know so well? If Gen Z can start investing in real estate early, that may be the decision that most helps their chances of reaching that lofty retirement goal.
Rise of Wealth Technology
There are many new real estate investment models that match the value of real estate with the behaviors and interests of Gen Z. Online platforms and apps are fueling the digital habit that new generations are accustomed to through gamification and colorful receipts while working on democratization. property with split investment opportunities. At the same time, personal finance influencers on social media have grown in popularity, offering a hyper-personal approach to financial literacy that many appreciate. These platforms make investing easier than ever, but there are a few that educate next-gen investors about long-term investing. It’s safe to say that those who take inspiration from the baby boomer’s guide to building wealth will be the ones who will stand the test of time.
With 25% of Gen Zers planning to retire before age 55, there has been a massive shift in the generational understanding of what it takes to hang up your work boots and retire for good. According to Goldman Sachs, while around 30% of under-40s believe they need 60% or less of their pre-retirement income in retirement, Gen X respondents believe they need 80% of their income. from pre-retirement to retirement. It’s up to Gen Z to navigate their way and decide how to build a retirement fund that they can comfortably live off of in the future.
Gen Z’s investment models are promising. We can see that the increase in investment opportunities from the growth of wealth technology is causing young people to question their strategies. They are motivated to save aggressively and prepare for retirement, but even with this motivation, the rate of inflation and current trends in the housing market show a need for more accessible real estate investment opportunities aimed at Gen Z. , presented earlier in the financial cycle.
Sachin Jhangiani is co-founder and CMO of Elevate Money, a real estate investment platform.