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Millennials and Gen Z are saving less for retirement

Money wallet AP
Posted at 1:52 PM, Aug 22, 2022
and last updated 2022-09-08 10:03:21-04

DENVER, Colo. — In a time where almost everything costs more, it's easy to feel overwhelmed thinking about saving for the future. For many people, that feeling is changing the way they spend money.

Fidelity published a new report on the state of retirement that found 55% of adults between 18-35 years old put their retirement planning on hold during the pandemic, and 45% say they don't see a point in saving for retirement until the economy gets back to normal. Thirty-nine percent of young respondents said they expect to retire later than normal.

Whether it's spending on travel or purchasing big ticket items, more millennials and Gen Z are focusing on shorter-term spending than on saving for retirement. The report credits the pandemic with shifting young people's priorities. While there is some general pessimism about the future of the economy, the report did find that 79% of Americans of all ages are confident they will be able to retire how and when they want.

Diddiery Santana isn't currently worried about retirement. She's spending three months living abroad as a college senior.

"I'm currently in Spain doing an internship with the Institute of Film Madrid," she said.

It's a trip she never would've taken without living through the pandemic.

"My family, they are workaholics. It's in our blood. It just it is how it is," Santana said.

Santana said her family didn't take a lot of vacations growing up. They were too busy building their American dream. Her parents immigrated from Mexico and saved up to open a restaurant.

"I would spend more days at the restaurant than probably in my own house, and it's always been us four always together, just trying to push each other through," Santana said.

Pushing through meant saving every penny to keep the restaurant running. They also taught Santana how to pay her way through college.

"I knew that they, personally, were not going to be able to pay for my college, you know, like other classmates were like, 'Don't worry about it.' No, I did have to worry about it. So, I've always had the mentality of needing to save," she said.

The pandemic flipped that mindset upside down.

"So many of us have lost so much, you know, and besides losing loved ones, we lost so much time, you know, and it hurts. And it's so sad just to realize how drained we are," said Santana. So, she decided to stop losing time. She took her entire rainy-day fund and cashed it in for a summer interning and traveling in Europe.

"Life doesn't stop. So I'm like, if I had the opportunity to do it now, I'm going to do it," said Santana.

"Since the pandemic, we've noticed a surge of younger clientele with more of a focus on work-life balance," said Steven Harp, CEO and founder of the Colorado Wealth Group. "So what we are doing in the last couple of years is helping people create a plan to kind of hit a couple of different marks. So we've got to hit these short-term goals of travel and new homes and different spending patterns, as well as not forgetting about the long-term goals as well."

Harp said he was comforted by the Fidelity report that found many Americans do have a plan or will plan for retirement eventually. He claims sentiment is less negative than in other times of turmoil.

"I didn't catch that 'everyone's panicking.' You know, this is very different than, you know, back in 2008, 2009, 2010," Harp said.

He's teaching his clients that, with a financial plan, they can save for retirement and do small things to enjoy life in the present—no matter their budget.

"There's room for the savings, and there's still room for the entertainment or the enjoyment, and there might be a couple of small sacrifices along the way, but you just kind of put everything in the scale and take your choices along the way," said Harp.

"It doesn't take a big trip. It does not need to be, 'Go across the country.' But, go to that concert, you know, that baking class, whatever it is. Find your happiness in anything around you," said Santana.

Santana decided saving for retirement is not her number one priority right now, but that could change in the future.

"You know, some of us are being irresponsible, have no idea how to handle their money. And that's just the way they do it. But then, there are some of us where, you know, this is this is the moment that we've been waiting for for so long, and retirement's going to come when it needs to come," said Santana.

To read the full Fidelity report, click HERE.