Here’s How Much More Gen Z Needs To Be Saving in Case Social Security Ends
Nearly half of Gen Z adults said they don’t expect to get a dime of the Social Security benefits they have earned, according to a 2023 survey by the Nationwide Retirement Institute. If Gen Z isn’t counting on their Social Security benefits, how much should they save for retirement?
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Sixty-four percent of Gen Z respondents were also more likely than baby boomers and older respondents to say they have or “will have retirement accounts and savings as additional sources of retirement income beyond Social Security benefits.”
Approximately 74% of Generation Z also worry about the Social Security program running out of funding in their lifetime.
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Will Social Security Run Out?
The Social Security program will never actually run out of money. As long as workers pay FICA taxes, retirees will always receive their benefits. Most significant, in the Social Security Administration’s 2023 Trustees Report, the following was made clear:
“The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, one year earlier than reported last year. At that time, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 77 percent of scheduled benefits.”
There’s still time for lawmakers to take action and address the funding shortfall, but younger Americans are taking matters into their own hands.
“There’s this idea that the government isn’t looking out for your retirement, so you have to do it yourself,” Lillian Zhang, a 23-year-old product marketing manager at a tech company in the Bay area explained to CNBC Make It. “If you’re younger and relying on Social Security for a payment, I think that’s really risky.”
Zhang opened her first retirement account at 20. Now, at 24, she has six figures saved across three different retirement accounts. She isn’t the only Gen Zer stashing money away and prioritizing her golden years.
How Much Does Gen Z Need to Be Saving?
According to Northwestern Mutual’s 2024 Planning & Progress Study, the average Gen Zer started saving at age 22 and expects to retire at 60, while boomers and older generations started saving at age 37 and expect to retire at 72. When it comes to retirement savings, most Gen Z adults believe that the “magic number” they need to retire is $1.63 million, but the average across all generations is about $1.46 million.
If a 27-year-old Gen Z adult already had $22,800 saved for retirement, which is the average retirement savings amount for the generation based on Northwestern Mutual’s study, they would only need to save $324 per month over the course of 40 years to reach $1,502,531, based on calculations by The Motley Fool. This could potentially generate $60,101 of income per year in retirement, assuming 4% annual withdrawals from your investment portfolio.
But what if you’re starting with $0 at the same age and want to reach $1.61 million, which is the gap between Gen Z’s retirement goal and current savings? The Motley Fool determined that you’d need to save $518 per month for the next 40 years if you want to have $1.61 million by the age of 67, assuming an 8% average annual return with a diversified portfolio of mostly stocks.
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