Millennial and Gen Z workers could make an “astronomical” amount of money if they take advantage of the one obvious factor that’s working in their favor: time.
By making good use of the years ahead of them and saving early, the renowned financial expert Suze Orman believes that Gen Z workers have the potential to retire as millionaires.
“You start right now in making your money grow and you’ll have more money than you ever dreamt possible,” she told Moneywise while adding that delaying your investment journey by a mere 10 years could “cost you $700,000.”
Unlike Gen X and baby boomers, time is on your side
Investing in your future self can be a hard notion to grasp when you’re in your early twenties and simply enjoying life.
But it’s a mentality that will cost you—literally thousands, according to Orman.
“You want to play and have fun, that’s on you later on in life when you can’t pay your bills,” Orman told Moneywise.
“Their priority is their youth, their priority is time,” she said. “If there’s anything the younger generation needs to understand, it’s that the key ingredient to any financial freedom recipe is compounding.”
She used just $100 to highlight how powerful compound growth is.
By investing $100 every month from the ages of 25 to 65 into the likes of a Roth individual retirement account (IRA), Gen Z could retire as millionaires.
“With a 12% annual average rate of return—the markets can do that for you—you’d have a million dollars,” she explains.
Depositing a monthly investment of $100 into an account with a 12% yield would net someone approximately $1,188,342 in 40 years’ time.
But here’s the catch: The longer you delay your investment journey, the lower the accumulated amount of money will be.
A millennial who is just five years older when they start their investment journey at 30 would accumulate around $649,626 by age 65. Shockingly, a mere five years is enough to slash the return by almost half.
Meanwhile, waiting 10 years to start your investment journey would could you $700,000, as Orman points out.
Of course, this is a simplified calculation that doesn’t take into account taxes or account limitations—for instance, if your income is over $153,000 you cannot contribute at all—but it highlights why time really is young people’s greatest asset when it comes to building wealth.
12% could be conservative, says Orman
The 12% annual average rate of return, which would make a Gen Z worker a millionaire before the age of retirement, is a conservative percentage, according to Orman, who estimates you can expect up to a 25% rate of return on your money.
It’s why the financial guru insists Gen Z take advantage of employer-sponsored savings vehicles like 401(k)s and IRAs, which offer tax benefits and potential employer matches, as well as exploring investing apps that require minimal initial investment.
“If you commit to this process month in and month out—and you do it for a long period of time—“the amount of money [you] could have would be astronomical.”
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FAQs
She further noted that you could become a millionaire if you're 25 and you put $100 a month into a Standard & Poor's 500 index fund — through a Roth IRA — every single month for 12 months, every year, until you are 65. “It's very probable that you will average a 12% annual rate of return over 40 years.
How much money do I need to retire as Gen Z? ›
While the average member of Gen Z said they'll need $1.63 million to retire comfortably, according to Northwestern Mutual, some advisors say the real number eventually could exceed $2 million. Even more striking: Northwestern Mutual's survey finds 32% of respondents of all ages haven't started saving at all.
What does Suze Orman say about taking social security at 62? ›
As we have discussed, you are eligible to start claiming your benefit when you turn 62. But the benefit you receive at 62 will be permanently lower than if you wait. Every month past age 62 you don't claim your benefit entitles you to a slightly larger payout when you do start collecting your benefit.
How much is $100 a month from 25 to 65? ›
$1,176,000. You do NOT have to retire broke.
What do millionaires do when they retire? ›
"The key is to keep the reinvestment going and be disciplined about putting money back into successful businesses, real estate projects, or into stock market-related investments from cash flow created from rental and other business activities," says Daugs. Finding a financial advisor doesn't have to be hard.
How many people have $1,000,000 in retirement savings? ›
However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.
What percentage of retirees have $500,000 in savings? ›
How much do people save for retirement? In 2022, about 46% of households reported any savings in retirement accounts. Twenty-six percent had saved more than $100,000, and 9% had more than $500,000. These percentages were only somewhat higher for older people.
How much money will I lose if I retire at 62 instead of 65? ›
A worker can choose to retire as early as age 62, but doing so may result in a reduction of as much as 30 percent. Starting to receive benefits after normal retirement age may result in larger benefits.
What is the disadvantage of taking Social Security at 62? ›
Depending on what someone's retirement age is, the decision to collect Social Security early could result in a monthly reduction of about 20 to 30 percent of what they would have gotten if they waited until full retirement age.
Why not take Social Security at 62? ›
Waiting to claim your Social Security benefit will result in a higher benefit. For every year you delay your claim past your FRA, you get an 8% increase in your benefit. That could be at least a 24% higher monthly benefit if you delay claiming until age 70.
Typical Net Worth at Retirement
| Age Range | Median Net Worth | Average Net Worth |
|---|
| 55-64 | $212,500 | $1,175,900 |
| 65-74 | $266,400 | $1,217,700 |
| 75+ | $254,800 | $977,600 |
Mar 27, 2024
How long will $1 million in retirement savings last? In more than 20 U.S. states, a million-dollar nest egg can cover retirees' living expenses for at least 20 years, a new analysis shows.
What happens if you save $100 dollars a month for 40 years? ›
Your Retirement Savings If You Save $100 a Month in a 401(k)
If you're age 25 and have 40 years to save until retirement, depositing $100 a month into a savings account earning the current average U.S. interest rate of 0.42% APY would get you to just $52,367 in retirement savings — not great.
What are the 3 things millionaires do not do? ›
Millionaires prioritize avoiding consumer debt, making wise financial decisions, and aligning spending with long-term goals.
What do 90% of millionaires do? ›
90% Of Millionaires Are Made In Real Estate - 100% Of Billionaires Are Made HERE.
What bank do millionaires use? ›
1. JP Morgan Private Bank. “J.P. Morgan Private Bank is known for its investment services, which makes them a great option for those with millionaire status,” Kullberg said. “With J.P. Morgan, each client is given access to a panel of experts, including experienced strategists, economists and advisors.”
Is it possible for Gen Z to retire? ›
3 in 5 Gen Zers expect to retire by age 65
Americans can start receiving social security benefits as early as age 62, but many Gen Zers are planning to start their retirement even earlier than that milestone.
Are Gen Z saving more for retirement? ›
Gen Z households in 2022 had two-and-a-half times more assets in their DC plans—adjusted for inflation—than Gen Xers had in 1989 at the same age. ICI stated that the story is similar for Millennial households when compared with the same age cohort in 1989.
At what age will Gen Z retire? ›
According to a new report from Northwest Mutual, Gen Z's average expected age for retirement was 60. This is much lower than other generations, like baby boomers who expect to keep working into their 70s.
Do millennials need $3 million to retire? ›
Retirement isn't cheap. In fact, a recent analysis conducted by Wealthcare Financial found that by the time Gen Z and millennials retire, they will need around $120,000 to $150,000 per year to live comfortably — making $3 million the average amount they need to retire. So, it's important to start saving early.
