Retire at 59? Here's why Gen Z Americans think they can do it

Since the 1990s, Americans have been retiring later and later in life. But Generation Z thinks it can do better — way better.

According to a study by Northwestern Mutual, America's youngest adults expect, on average, to retire at age 59. That's a good deal younger than the average adult's expectation, 64, and far younger than baby boomers, who said they expect to retire at 71. Even millennials set their sights slightly lower, with a retirement ETA of 61.

Why do Gen Zers think they can leave the workforce so early? Research shows it's part of the age group's overall pattern of economic optimism — maybe even too much optimism, in the view of some experts.

"It's an overconfidence in their ability to have outsize returns for a prolonged period of time," says Andre Jean-Pierre, a New York-based financial adviser who works with many young investors. 

Northwestern's survey reflects that confidence. Seventy-nine percent of Generation Z respondents said they've had or will have a successful career — as compared to 74% of millennials, 75% of boomers and just 64% of Generation X. They were also bullish about their nest eggs, with 70% saying they've achieved or will achieve long-term financial security — as opposed to 66% of millennials and 58% of Gen Xers. Only baby boomers, the richest generation in U.S. history, matched Gen Z's level of optimism about this.

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Ironically, these self-assured young investors were also the least confident about something else: their emotional well-being. According to Northwestern, 44% of Gen Z Americans described their mental health as "weak" or "very weak" — much more than the 31% of millennials and Gen Xers who said so, and more than triple the 13% of baby boomers who expressed the same concern.

Overall, the picture the study paints is of a generation full of contradictions — bursting with financial self-confidence but saddled with emotional self-doubt. What could explain this strange mix of qualities?

Jean-Pierre believes there are two factors behind this. About 30 of his clients — roughly a third of the investors he works with at Aces Advisors — belong to Generation Z, which scholars generally define as those born from 1997 onward. As such, most of these clients are too young to remember the dot-com crash of the early 2000s or to have experienced the Great Recession as adults. For the longest and most recent stretch of their economic memory, the stock market was on an extended upswing from 2009 to 2021. Jean-Pierre thinks that's given them some unrealistic expectations.

"There is a strong confidence, but I also believe that's the byproduct of never truly experiencing a downturn," he says.

The second factor has to do with social media. Many young investors follow financial influencers — sometimes called "finfluencers" — who only post about their absolute best (real or fictitious) decisions. Jean-Pierre believes this inflates Gen Zers' sense of what to expect from a good investment. And when that expectation is disappointed — for example, by a steady, modest return on an index fund instead of spectacular profits from a penny stock — it can lead to anxiety and depression.

"I think Gen Z might be the first generation that most of their social experience in life was completely formed online," Jean-Pierre says. "It essentially makes them feel less accomplished, because they're comparing themselves to highlight reels rather than the day-to-day experiences of people."

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The plus side to all this is that because of their exposure to others' investments, Gen Z Americans are extremely knowledgeable about finance. Take, for example, their choice of 59 as the ideal retirement age. Jean-Pierre thinks that's likely because 59½ is the age when Americans are allowed to withdraw from 401(k)s and other retirement accounts without paying a penalty. It takes a highly savvy 20-something to know that, and Jean-Pierre finds that encouraging.

"I've seen a lot more Gen Z people more interested in investing, stock ownership and bond ownership a lot younger and understanding the principles of investing a lot younger," he says. "The downside of this is if they don't have success early, they can be discouraged faster."

The net result is a volatile combination: lots of knowledge, extremely high expectations and precarious self-esteem. That can be a challenging personality for advisers to work with, but Jean-Pierre thinks it makes their work more important than ever.

"Even though there's robo-advisers, nothing will beat a human being having a conversation with you and managing your emotions," he says.

If these young investors and their advisers can pull that off, Jean-Pierre sees a bright future for them — whether or not they actually retire at 59.

"I love that Gen Z is getting involved in asset ownership younger than most generations," he says. "Their optimism is important. I think their ability to invest in themselves and their future is going to spur huge growth in the market and huge growth in the economy, and it's good for everyone in the long term."