What It Will Take for Gen Z To Build a $1 Million Retirement Fund
Ah, Gen Z. The generation of bomber jackets, mental wellness and TikTok. They just wanna be left alone, man. Why worry about retirement when AI is threatening their very existence?
Well, while it may seem like Gen Z (born between 1997 and 2012) has more important things to worry about, experts unanimously agree they still cannot neglect retirement planning if they want to be well-positioned in the future. This is because time affords them the greatest advantage in building a sizable retirement fund.
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“The most valuable asset Gen Z has is their age and timeline between where they are today and retirement age, call it 60 years,” said Ari Rastegar, the owner of Rastegar Property Company. “That means having 40 years of compounding.”
And compound interest, as Albert Einstein once stated, “is the greatest mathematical discovery of all time.” This is largely due to the fact you can earn money off your money by *checks notes* doing nothing. Which Gen Z’er doesn’t love that sound of that?
According to author Pranav Bhatnagar, if a 25-year-old were to invest $500 a month with an average return of 8% annually, they’d accumulate over $800,000 by the time they reach retirement age. If they increase that monthly investment as their income grows, they can easily reach $1 million.
So what are some steps Gen Z can take to set themselves up to retire with $1 million? Read on.
Regularly Invest
Echo Wang, CEO and founder at EpicBooks, said Gen Z should regularly invest in a low-cost S&P 500 ETF. Then let compound interest do the real work for them. For reference, the historical average return of the S&P 500 is roughly 10%.
Regularly Contribute to Retirement Accounts
It’s essential to regularly contribute to retirement accounts like 401(k) plans and IRAs. And, if available, take advantage of employer matching. According to SmartAsset, the average rate of return on retirement accounts is somewhere between 5% and 8%.
Avoid High-Interest Debt
Nothing messes up your financial gains like getting stuck under a mountain of debt—particularly high-interest debt. Even if your investments are earning compound interest, you’ll just be breaking even paying off those credit cards.
Automate
Let’s face it: It’s always easier to spend your money than to save or invest it. That’s why it’s crucial to limit temptation and automate your savings and investments. As soon as your paycheck hits your account, a portion should automatically be re-allocated.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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