Financial anxiety is a common trope used towards Gen Z. Despite the stereotype, a majority of Gen Z individuals are actively seeking to build savings and reduce debt, according to Adviserpedia.
It’s easy to believe that Gen Z is only facing one financial threat when, in fact, they’re facing a variety of risks that may hinder retirement planning. Wading through those problems can make saving for retirement challenging at best.
GOBankingRates asked two financial experts for the biggest threats to Gen Z’s retirement savings. Here’s what they had to say.
High-interest debt is suffocating, making it difficult to save.
“Many Gen Zers have high credit card debt, which is a large factor holding them back from their retirement savings goals. The average Gen Zer has over $3,000 in credit card debt, and that number continues to rise,” said Jason LaBarge, president and financial advisor at LaBarge Financial.
Interest payments stress a budget, leaving little left to go towards retirement planning. Lack of knowledge isn’t always the problem, though. It’s simple math.
“From what I see with younger investors, the biggest threat isn’t always a lack of knowledge; it’s often a lack of margin,” added Julia Bartak, certified financial planner (CFP) and financial advisor at Edward Jones. “Their budgets are so tight that even when they want to save, there simply isn’t enough leftover cash after student loans, rent and basic life expenses.”
Worse yet, the average Gen Z has monthly student loan payments of $526, according to Empower. When you combine credit card debt and student loan payments, it’s easy to see why many Gen Zers have little left over to save for retirement.
Find Out: Here’s How Much You Need To Retire With a $100K Lifestyle
Explore More: 5 Clever Ways Retirees Are Earning Up To $1K per Month From Home
Americans are facing significant economic headwinds, making it challenging for many to save for future goals. For Gen Zers dealing with significant debt loads, the growing costs intensify the situation.
It’s easy to believe that the younger generation is spending on unnecessary luxuries. That’s often not the case, argues Bartak.
“With Gen Z clients, the biggest hurdle is cash-flow suffocation. They’re not necessarily overspending on luxuries; often they’re overspending on necessities. Rent alone can take up to half of their take-home pay, not leaving enough room for long-term planning,” said Bartak.
Add to that rising prices due to inflationary pressures and tariff-induced increases, and it leaves Gen Zers with a dwindling pool of funds in their budgets to devote to long-term planning.