What we learnt:
23 out of the 30 interviewers plan to retire someday. The average age GenZ plans to retire is 52 years old, which is younger than we expected. 27% want to retire at 45 years old or younger. Nineteen people regularly save money, but only two indicated they were saving for retirement.
Of the 12 interviewees who indicated how they would like to spend their retirement, travel was the most popular option.
Some expressed a desire to continue working or doing philanthropic work during retirement:
“If I have a hectic nine-to-five job then ideally I would love to retire but not stop working. I would like to have a side hustle and do something. Like, running or coaching. I don’t know where I’ll be in the world one day. I like to feel busy. I’m not someone who would ever be a stay-at-home mom doing nothing. That’s not me at all. I like keeping busy, keeping our brain active.” – Jaydan (22, White, female)
“[I would like to] spend time with those that need some, just giving back and giving my time. And teaching people basic skills of whatever that I would have picked up at that time.” – Balekane (28, Black, female)
“65 to 75, like as late as possible, in actuality. I don’t believe that retirement is such a good thing. I think that when people stop working and stop applying themselves, they age very fast, and you become more susceptible to mental issues because you don’t use your brain and you don’t have a purpose. You know you see it with old people the minute they retire, they age very quickly. So you know you say you want to retire at 40 years. But what will you do every day?” – Bryan (White, male)
One or two are aggressively saving towards an early retirement:
“[I would like to retire] before retirement age, somewhere around the age of 45. So that I can actually go pursue my dream job because I believe that by that age, or by that time, I would be in a position to do whatever I want, whether there’s income coming in or not. And that’s why there’s aggressive saving happening while I’m still in corporate at the moment.“ – Lerato (27, Black, female)
“But I’m looking at 35. I should be married by that [time] and I should be done working my ass off and everything like that.” – Sizwe (Black, male)
Bronwyn Williams says “[Gen Z] may be too optimistic. My favourite question was when they expect to retire. The average age was about 45. We like their optimism but perhaps this is something that could actually be actualized when we start to decouple the ideas of what work is and what retirement is. I mean, these are great conversations that we could be having in society.”
What does the research/experts say:
From a South African perspective, according to September 2022 research by Insites Consulting, a global consumer insights company, 13% are investing in retirement. This data corresponds to the percentage in our research findings (14%).
Research shows there is an apprehension surrounding retirement among the South African population at large. A survey conducted by Debt Rescue made headlines in September 2023 when it revealed for 40% of South Africans retiring is a more terrifying prospect than Death.
66% of South African Gen Zers are not sure they have enough to retire, according to the World Bank’s Prosperity Data360 as reported by Sanlam in November 2023. This data corresponds to US data of 66% by the Transamerica Center for Retirement Studies in July 2023. This data indicates an emerging trend among young people called ‘soft savings’. “Though Gen Z is interested in and learning about saving and investing, the approach is much softer than in previous decades – it’s all about personal growth and mental well-being in the now, and they would rather feel more fulfilled now than save for a future that is unknown,” according to a January 2023 report by Intuit – an American multinational business financial software company.
Another contradictory trend that has gained popularity among Gen Z is the Financial Independence, Retire Early (FIRE) movement. 40% of Gen Z-ers in the US expect to retire at 50 and outpace previous generations in retirement savings compared with the same age cohort in 1989. This approach, seen as radical to many, raises the questions of whether this is achievable or an optimistic delusion that comes with being in your 20s and how it accounts for Gen Zs expected to live longer than their parents. Living to 100 may no longer be noteworthy. Detractors caution that the zealous dedication to frugality that this requires is detrimental to their mental health. Notwithstanding, the internet is rife with young people who claim to have retired early. Perhaps it is time we start thinking about retirement a little differently.
Retirement up to this point has been about working for about 45 years in the same field, gradually becoming more of a subject matter expert and then retiring. After which, one retires to spend much time undertaking relaxing pursuits such as travel and playing golf.
A lot has changed since then. For one, many young people are receiving income from side hustles that they are investing in themselves or their businesses rather than saving for retirement. The hope is that these investments will help them grow their businesses substantially and rapidly enough so that they can afford to put away money for retirement later on. They also tend to change jobs quite often. Old Mutual’s 2022 Retirement Gauge revealed that about 90% of them cash in their pensions when they do, losing out on compound interest that comes with investing early. Another change is that young people are not looking to stop ‘working’ when they retire by taking on a passion project or owning their own business. Some believe they will have the luxury of this choice even so a large majority feel they would need to keep earning an income because of financial constraints. They acknowledge that they will live longer than their parents and the value of staying mentally stimulated in old age.
What can businesses and policymakers do about this?
There is an opportunity for businesses to assuage the anxiety they feel about retiring. Financial education tailored for consumers looking online for guidance and still finding their feet about how to save or invest their money is advisable. Do not discount the power of offering financial advice in person. Visit educational institutions to educate and not sell to them. Partner with influencers to also spread the message of the importance of starting early. Speak the language of the youth instead of applying a one-size-fits-all approach to selling investment products.
Employers must accept that Gen Z workers will not stay with your company as long as previous generations did. When they leave, there is a danger that they will cash in their retirement savings. Offer a way to transfer their savings to the next job to encourage them to let their retirement accumulate. This approach could attract new talent and retain young employees for longer. In the future, many benefits will link to the employee rather than the employer. It is advantageous for an organisation to invest in supporting the financial wellness of its employees. An employee who is not debt-ridden and is saving has a greater sense of well-being than others, which makes for a more productive employee. Offering financial literacy education as a benefit is recommended.
Policymakers want people to thrive in their old age. They want them to be physically and mentally healthy because that makes for a well-functioning society. It also means reduced strain on public services such as healthcare. Allowing retirees to live comfortably off their savings in old age can achieve this. Educational campaigns aimed at young people that impress upon the importance of starting to save early are advantageous. Financial incentives to encourage saving are recommended.
Retirement is being redefined. All stakeholders should take heed of this.
The data and quotes mentioned above refer to a project that we are in the midst of, in conjunction with Student Village called “The 30/30/30 Project” whereby we collected insights from 30 South Africans, under the age of 30, 30 years into our new democracy.
By Flux Trends
WHERE TO FROM HERE?
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Image credit: Annie Spratt
