Money-Phobia Is Crushing Millennials And Gen Z: A Financial Expert Explains
Between student debt, housing prices, and inflation, the millennial and Generation Z generations have faced some of the worst financial circumstances of any other generation alive today. This has left many feeling like they're at a disadvantage when it comes to economic opportunities. Perhaps one of the biggest shifts for younger generations is the increasing inaccessibility of the American dream that their parents and grandparents pursued. According to an August 2023 USA Today poll (conducted by The Harris Poll), 65% of Gen Zers and 74% of millennials reported believing they were starting further behind financially than other generations before them. Many millennials and Gen Zers not only feel financially stressed in the present but also increasingly feel bleak about the future. Specifically, many feel like retirement will simply never happen for them, especially in the face of just how much people believe they need to save for retirement. This is leading to a kind of money-phobia or money dysmorphia that's further hurting young people's financials.
We spoke with Jason Tartick, a bestselling author, finance expert, and podcast host, about money- phobia and how it's affecting younger generations today. He explained the concept, "It's the idea that we all want so much more and we're looking left and right at what everyone has but we don't know how to get there." According to a 2023 Credit Karma study on money dysmorphia, 48% of Gen Z and 59% of millennials reported feeling behind financially. This anxiety surrounding finances can and does contribute to feelings of financial insecurity, which can lead to bad financial decisions.
Saving for retirement
There can be a lot to know about how, or even when, to start saving for retirement. Jason Tartick explained some basics, "Now the basis of a benchmark for retirement: If you take your annual spend and multiply it by 25 right now, that is the amount of money you will need, and you can live off for 30 years." While these numbers are general, and could very well change in the face of both climate change and changing attitudes about workplace culture in the United States, planning for the future is still important. Perhaps one of the most important things to avoid is a sense of hopelessness, even if the amount you think you'll need to retire is daunting. Plus, it can be important to remember that 401(k)s, IRA accounts, and employer-matching programs can help you meet your financial goals.
Another thing to consider is how much time you might have to save. Tartick said, "According to a study done by JP Morgan, if you are 65 years old and you are in great health and you're a nonsmoker, your likelihood of living to 90 is 71%." This means that you do technically have "more time" to save for retirement even if that also means you might have less time to actually enjoy retirement. Tartick noted, "Our retirement is all connected to our age, how long we will live, and how much we plan to spend based on the nest egg we build. The less we spend today, the better position we are in to retire tomorrow."
A changing retirement age
One issue younger generations in the United States will have to contend with is how the retirement age is going to inevitably change. While 65 has long been seen as the benchmark age for retirement, Social Security has already pushed the full-benefits retirement age to 67 (for those born after 1960). Industry experts expect even this age will continue to be pushed back in the future. While some see pushing the finish line out as a positive (for instance, the Republican Study Committee recommended raising Social Security's full retirement age to 70+), others worry about how pushing benefits could harm workers throughout the country.
As Jason Tartick put it, "I think retirement right now for our generation, if we don't start to take control of it, is going to be pushed back, we are all going to retire later, which I guess connects to us living longer." While living longer is definitely a top reason used for pushing the retirement age, not everyone agrees this is accurate. A good example is that, while the average life expectancy at 65 has increased across the U.S., longevity for the bottom half of earners has barely risen. This means the life expectancy gap (by income) continues to grow, which adversely (and disproportionately) affects low-income individuals and people of color. While younger generations may or may not face a longer life expectancy than previous generations, they're guaranteed to face an older retirement age. This makes it more important than ever to start saving as early as possible.