For Gen Z workers, the idea of working and saving for decades to reach the
According to a survey by Goldman Sachs Asset Management, 25% of Gen Z plan to retire before 55. In fact, on average, millennials and Gen Z expect to retire before 60, according to Northwestern Mutual, despite the average retirement age sitting at 62.6 years old. And with time on their side, it may be possible to set off the path that leads to early retirement.
“One of the most interesting things about younger generations is that they have a good understanding of how important it is to save and plan early,” says Nancy DeRusso, head of financial wellness at Goldman Sachs Ayco Personal Financial Management. “But even though you can always try to plan for your goals today, be prepared for them to change.”
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While life may prove far too spontaneous for a stringent retirement plan, DeRusso believes self-awareness and reasonable contributions can go a long way. EBN spoke with DeRusso to learn how young workers should approach retirement and how
What challenges do younger workers face when it comes to retirement planning?
People do not understand how almost every financial decision impacts their retirement planning. And there isn’t enough education around benefits and how employees can optimize them for their personal situations.
Beyond that, one of the greatest challenges is the fact that you don’t know what is going to come between now and retirement. If you're 20 or 25 years old and entering the workforce, you can’t foresee everything. For example, at 25, I have no vision of kids. I've got my entire plan set up, and I want to retire early. Then 10 or 15 years later, you fall in love and get divorced — now half of your savings are gone. A couple of years later, you fall in love and marry someone who has five kids. You're now 45 with five kids and four grandkids, with college funds on your mind. And this is all positive and exciting, but at 25 years old, that’s nowhere in your plan. You don’t know what life or your goals will be years down the road. That's the most underappreciated challenge.
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Despite this, how should workers approach the road to retirement?
At least as of today, identify what your goals are and map them out. This means understanding your income sources and your expenses. It’s true that the biggest thing you can do is control your expenses. However, as people try to plan too quickly or too aggressively, it becomes like a stringent diet. If you do not eat at all, you go off-kilter and hurt yourself. It’s about balance — save and enjoy life as you're living it. Then look around a couple of times a year and ask yourself if you’re on track. Are your goals still the same? Did you change employers and now have different benefits available to you? You have to keep an eye on it and be realistic.
What benefits should employers offer to ensure their employees have the tools to retire?
Employers should have a financial wellness benefit tied to the rest of their benefits because many people don't understand the benefits available to them. By having a financial wellness or financial planning benefit, it allows employees to marry and match their personal situation with what employers are offering.
And while this point may seem more obvious, it’s always worth repeating: employers need to effectively communicate their benefits. Sometimes employers are hesitant to bombard people with emails, but if you miss somebody at the right time and the right moment, they might not even realize that these benefits are available to them.
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Employers also have to stay current with the issues of their population. For example, student loans and child care are big challenges for people right now — have student loan repayment assistance and child care subsidies. Additionally, you never know what people going through outside of work, so have flexible healthcare plans and mental health benefits.
Employers, be sure to partner with other companies for discounts, whether it's for something like health benefits or better mortgage rates. They can use the power of the employer and group policies to get better discounts versus someone trying to do it on their own. And getting discounts on everyday things may not appear to have the biggest impact, but a discounted rate on your mortgage or a better rate on loan can make a huge difference. Employers should offer anything that helps their workers beneficially integrate their work into their lives.
Will younger generations be able to retire early?
While the trend implies that people definitely want to retire early, I think this generation is still so early in their careers — it’s hard to say what will happen as they get further along in their lives. They may have goals that would be benefitted from working longer, or they might develop different passions and switch industries later in life. Nevertheless, people should not be disappointed by their plans changing. If life takes a turn for the bad or good, you can revisit and adjust your plan — there’s nothing wrong with experiencing life as it comes.
