Gen Z wants to retire early. They're off to a good start
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Someone retiring "normally" around 60-70 has traded their labor for money, usually in ways that can benefit other people in some fashion. When they retire, there are multiple benefits -- their previous position opens up, hopefully allowing the next generation to be promoted. Their years of experience help shape the way the next generation runs the business, hopefully because they know why things are the way they are (Chesterton's Fence) and can pass that information along. This is pending the retiree not being a serial job changer of course, institutional knowledge requires people staying to learn it.
Compare that with someone who worked as little as they had to, achieved FIRE and retired early at 30. They didn't "pay into" an organization, they just extracted value and retired. They didn't help lead anything. They didn't shape the culture for the next generation. And at the risk of stereotyping, I imagine "succeeding" in FIRE would inflate one's ego in very unhealthy ways.
I don't want to say "FIRE is evil" but SOMEONE has to create the value they are extracting, and if it reaches a tipping point where more are extracting than creating, it will make for a novel problem. Replacing workers with AI is an obvious stopgap, but that just perpetuates the current, weird monetary system we have and that profit would have to be redistributed as UBI or something for it to replace workers in a way that they don't just starve.
Society is changing and it's gonna change even more so it will be interesting to see where we end up.
I wonder how many of these people are even factoring changing demographics. As the population continues to age, retirement is going to get even more expensive because labor will continue to cost more and more
What would a FIRE Zoomer teach their children, especially if they invested in crypto early and got lucky? Why work hard if mom and dad "don't" work at all? Why go to college if the point of college is training for a career? How will those children be shown by example how to be a helpful member of society?
I suppose a lot of FIRE people likely intersect with the Child Free crowd where they are achieving financial independence by not having any expensive dependents they need to care for. That does reduce the amount you must spend by quite a lot, but if enough people do it the economy will have issues finding workers at all as more people voluntarily check out of the system and leave no descendants to continue in the future.
I agree with you. Currently at odds with the goal of having a society of happy people is the society-wide tendency to attempt to extract value from others. This can make for a lot of very unhappy people who have no resources to reproduce.
Regardless, society is made up of people, and people come from families. The tendencies those families normalize are likely passed down. There are negative tendencies that damage society, and positive tendencies that support society. Working for and with each other is one of those supportive tendencies, and while it can be learned at work or school, kids imprint and learn from their parents the most.
My main point is that if a FIRE couple ends up raising a family but don't have to work for a living, the kids may be missing out on a fundamental aspect of society in their day to day lives. Obviously entitlement is an issue with humans in general, but at a societal level FIRE feels a lot like a selfish "FU, I got mine" and that's not a great tendency to pass down to kids.
Again, if you replace FIRE with wealth, I don't see much of a difference. Perhaps you have bought into some wealthy ubermensch-like mythos of the rich as the "job creators", but I assure you that they're capable of as much laziness as anyone else. Much more in fact since they don't actually need to work.
I haven't done a good job of making that clear at all, and I apologize. There are surely a lot of people trying to reach FIRE goals and if that were to be a meaningful 15% of the population, how would we be affected as a society?
One thing that's interesting in all this is that a common FIRE tactic is to live very frugally your whole lives to achieve and then maintain FIRE. If a meaningful percentage of Americans stopped spending as much money, the economy would feel it at a certain point.
These are the kinds of society-level thoughts I have been aiming to discuss. FIRE makes for some interesting futurism if it becomes the dominant American household financial strategy.
But the question still stands, where will the dividends come from if the companies are underperforming and everyone is retired/dead?
(from the CFA Institute survey cited in TFA, https://rpc.cfainstitute.org/en/research/reports/2023/gen-z-...)
Jobs never really came back.
To state the obvious, 2008 was 15 years ago. So someone who was a senior in high school at 18 in 2008, is over 30 today.
So it is true that there's a generation that includes everyone in their 20s and those in their early 30s that have never experienced a significant market crash.
The vast majority of middle schoolers were not trading stocks in 2008.
To have experienced one downturn, a trader must've been trading back in 2007/early 2008. It is safe to say most traders in their 20s today were not active traders back in 2007. I'm sure exceptions exist.
All of my "Gen Z" family and colleagues invest, certainly, but many "invest" in the same way a millennial invests when they visit Las Vegas.
Low end of bell curve: Invest in index funds
Hump of bell curve (midwits): STONKS!!!
High end of bell curve: Invest in index funds
If we assume a 2% inflation rate going forward, that's only ~$600,000 in today's dollars. Seems like a relatively low bar, no?
Are you suggesting that they actually need ~$21 million for a 20 year retirement?
I do believe that would be 30k per year.
I assume you mean $30k per year. The recommended is more like $700,000, and that factors in your pension, but we're just using approximate figures here. Still, $30k per day today is quite doable for a retiree. What are you going to spend your money on, exactly? You've already purchased everything you need by that point in life, so you're just in maintenance mode.
Gen Z isn't 60 years old today. They don't have 600k, and for them, it is a high bar.
https://fortune.com/recommends/banking/57-percent-of-america...
The median American can afford to save considerable money but they tend to spend it on lifestyle flexes instead.
And certainly some people never did manage to save $600,000 over the past 40 years, but it remains that the bar does not seem that high. Even the lowest bar will not be met by some people, but that doesn't mean the bar is high.
In any case, if you want the categories separated, here you are:
In 2019, about half of American households had no savings in retirement accounts, according to the Survey of Consumer Finances (SCF). These accounts include individual retirement accounts; Keogh accounts; certain employer-sponsored accounts, such as 401(k), 403(b), thrift savings accounts; and pensions.
We're looking at those who have 20 years left, not those who could have 60 years left. Naturally one could avoid saving anything for 39 years and then plop down a $600,000 lump sum in the final second and you would be in the exact same place as someone who slowly amassed $600,000 over the span of 40 years, so half of the population having nothing saved doesn't tell us anything.
Bringing us back to the actual topic: Of those who have 20 years left, how much do they have saved?
Sure, they could for example win the Powerball.
A higher inflation rate also raises the goalpost money you need since life will be more expensive than predicted.
They'll need the equivalent of today's $3 million in inflation-adjusted dollars for the time they retire.
What you're saying amounts to a Zimbabwean being able to retire with his lunch money AFTER the country got 1000x inflation and everybody had trillions in their pockets just to get some food for the day - based on the purchasing power of that amount before the inflation.
I retired early years ago. It isn't the annual budget that one has to plan for, but the unforeseen expenses. I took care of my mom and dad for a while. He had top notch medical insurance, but no one covers mental health problems. The total for 4 years of that was just into 7 figures.
Also how about that medical insurance for yourself and your family? Unless people plan on dying young, medical insurance is a huge expense. And that's just insurance, which doesn't cover all eventualities. Ambulance ride? Not covered. A quick whistle to the ER can leave you $50k lighter without trying hard. And then there's the piles of medications, many of which aren't covered.
My friend's grandmother got upper and lower dentures. $40k. Dentures, mind you, not implants.
Also, there's the every increasing cost of everything. Houses, cars, food, all types of insurance are seeing vast annual increases.
$3 million total for a retirement is a bit of a laugh, unless that person plans on keeling over at 65.
$3M for retirement right now is plenty, but you have to live like an actually middle class person.
But if you're wanting to retire early, it's a huge gamble on medical expenses in the US.
Note the catch "for a 20-year retirement". So if you think you might live to be 85, you get to retire at 65.
If you want to retire early, you need more decades of runway thus a lot more cash saved.
I came from a blue collar background, hand-to-mouth background. We were, as John Scalzi would say, "broke" but not quite "poor." My parents didn't retire so much as age out of the workforce and scrape by.
Hope Gen Z'ers do better than I have...
? Median? These numbers seem unrealistic for anyone I know who went to college, and those who didn't are in low pay jobs with no retirement plan
Reminds me of Carlin's bit about the softening of language.
Not necessarily. It is quite possible for the median to be 19 even with nobody saving before the age of 19.
Consider a case of 10 people. 6 started saving at the age of 19. 4 started after the age of 19. 0 started saving before the age of 19. The median age is: 19.
> That sounds off... Considering what type of jobs they would have had.
Why?
1. Jobs aren't the only way to get money.
2. Typically parents cover living expenses at that age, so job income is pure profit.
3. You don't need huge sums of money to invest.
Still a useful stat in the relative sense to compare inter-generationally, or to previous surveys.