Gen Z members may need to temper FIRE talk, study shows

Commendably, more than half of the members of Gen Z consider themselves part of the FIRE — financially independent, retire early — movement. Unfortunately, they seem to lack the necessary funds to achieve either goal.  

According to a new study conducted by Qualtrics on behalf of Intuit Credit Karma, 53% of the members of Gen Z (those born between 1997 and 2005) consider themselves part of the FIRE movement. Moreover, nearly half of Gen Zers (47%) who consider themselves part of the FIRE movement believe they will retire early.

Nonetheless, 32% of these Gen Z believers in early retirement have no money saved for retirement. In fact, one in five Gen Z respondents (20%) report having no money in savings, demonstrating a severe misalignment in their plans to retire young and the reality of their financial situation. 

John Guthery, chief investment officer at FusionIQ, says the fact that such a large portion of the group hasn’t saved speaks to a lack of financial education, a lack of resources in some circumstances and the lack of easy access to saving strategies. 

“Banks, credit unions and other institutions are in a unique position to help Gen Z take the right steps forward,” Guthery said. “These institutions can offer solutions when they provide easy, low-cost access to professionally managed digital advice that provides options for younger investors, including a self-directed trading option. While there are some exceptions, meeting younger investors and savers where they are can provide a meaningful start toward retirement savings for almost anyone.”

The severe lack of Gen Z savings is partly attributable to sustained inflation and increasing borrowing costs. The report said that 20% of Gen Z respondents who are currently employed and have a retirement account have had to decrease their contributions within the last year as a result of inflation. Along those lines, 22% of respondents who are currently employed say they can’t afford to contribute to their retirement account or have no retirement account to contribute to. 

According to the study, more than three-quarters (76%) of Gen Zers don’t have a 401(k) or a Roth IRA (89%), making their expectations around retirement seem unrealistic.

“It’s interesting how bullish Gen Z is about their retirement plans, especially since so many have entered the workforce for the first time during an unfavorable economic environment, making it difficult for them to save money,” Courtney Alev, consumer financial advocate at Credit Karma, said in a statement.

“This generation’s appetite to retire early could have something to do with many of them not being beholden to the 9-5 career path,” Alev said. “And having grown up on the internet, they’re exposed to content creation at scale — much of it touting alternative ways to make money that people their age appear to be making a cushy living off of.

“While it’s inspiring to see how Gen Z is reinventing their own career paths, they should still prioritize putting money aside for retirement, or at least focus on building a general savings nest,” she said.

Robert Pearl, wealth advisor at SageView Advisory Group, says the country is divided into the investor class and the non-investor class, and Gen Z members need to step up if they truly want to realize their FIRE dreams.

“We all know the beauty of compound interest and how that creates a lot of wealth. There is still a portion of the population that are not part of the investor class. Every year they don’t participate, the larger the gap gets between those who invest and those who do not,” Pearl said.