Yahoo Finance Gen Z: 4 Key Signs You’re Doing Better Financially Than Boomers Were at Your Age
For decades, baby boomers have been the generation that defined financial success. But the world continues to evolve, and a new generation is emerging that is redefining what it means to be financially secure.
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By and large, Gen Zers are setting themselves up for a more secure financial future. But financial success is not determined by generational factors alone. If you’re a member of Gen Z, here are some indicators that you’re doing better now than your grandparents were when they were your age.
You’re Funding Your 401(k) Account
One of the most impressive indicators of Gen Z’s financial prowess is their commitment to saving for retirement from an early age. Unlike baby boomers, who expected to rely heavily on Social Security and pensions that are now dwindling, Gen Z recognizes the importance of taking control of their retirement through proactive planning and investing.
“Gen Z is the youngest cohort to begin funding their 401(k) account early in life,” said Lauren Williams, family wealth advisor at ProsperPlan. “The 401(k) was passed into legislation back in 1978 when the average boomer was around 25 years old. The IRS issued rules that allowed employees to contribute to their 401(k) plans through salary deductions, which jump-started the widespread roll-out of 401(k) plans in 1981. This means that most boomers didn’t have the means to fund retirement until they were, on average, 26 years old.”
This proactive approach to retirement savings is in contrast to the mindset of many boomers, who often neglected long-term planning like this. If you’ve started to save early, you’re gaining the benefit of compound interest, which will significantly amplify your retirement savings over time.
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Your Parents Have a Sustainable Retirement Plan
Another key advantage Gen Z has? They likely won’t have to financially support their parents in retirement like some millennials with their boomer parents. With many Gen Xers taking a more responsible approach to retirement savings and planning, Gen Zers may avoid that financial burden down the road.
If your parents have met with a financial advisor to create their retirement plan, Williams said, then they were probably coached to take out less money for living expenses. This means they will have enough money to last their whole retirement, and that you’re less likely to be burdened with supporting them.
“The children of the silent generation (aka boomers) never saw the type of money that will be transitioning to Gen X, millennials and Gen Z,” Williams said.
You Have Fewer Siblings
Family size is another noteworthy financial edge for Gen Z. Whereas baby boomers often grew up as one of several kids — meaning inheritances got split many ways — today’s young adults more commonly have just one or two siblings or none at all. Any future inheritance will be less diluted as a result.
“As the average child count per household declines while the average home value and investment account continue going up, it’s likely that you’ll be receiving a larger portion of a family nest egg,” Williams said. “This doesn’t mean you should defer your own investing. It does, however, mean that you should be talking to a skilled Certified Financial Planner earlier than past generations. There is a lot of investment planning and tax considerations ahead that you should start thinking about now.”
You’ve Deferred Having Children
Speaking of kids, delaying parenthood is yet another wise money move benefiting Gen Z’s overall financial stability. While boomers frequently started families in their early 20s, Gen Zers are holding off on having children until they are more financially secure and established in their careers and savings goals.
“The new trend is to establish your career in advance of having children,” Williams said. “This is allowing Gen Z ample time to begin investing in a Roth 401(k) well before they take on the expense associated with children. (Yikes! Have you seen the cost of daycare lately? It’s higher than my monthly mortgage).”
This decision to delay parenthood can have huge benefits. Without the immediate costs associated with raising children, you can focus on building your career, paying off student loans and accumulating savings.
“Make sure you’re taking advantage of this time to begin funding your Gap account and/or Roth with a minimum of 20% of your gross income,” Williams said. “You’ll be able to drop your savings rate a little while your children are ages 0 to 5 when daycare, diapers and healthcare expenses are their highest because you planned well.”
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This article originally appeared on GOBankingRates.com: Gen Z: 4 Key Signs You’re Doing Better Financially Than Boomers Were at Your Age
