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Gen Z is thinking of retirement too early and all wrong

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Picture: Dragen Zigic/Freepik – The key to building your wealth is to start as early as possible. Gen Z is the latest generation to stumble across the FIRE movement, or Financial Independence Retire Early, but chasing the promotion or career with the highest paycheque to move up your opt-out date could mean being a less colourful version of yourself, the writer says.

By Erin Lowry

There’s a beautiful naiveté to spending a couple of years in the workforce and deciding it’s not for you and it’s time to work toward opting out. Gen Z is the latest generation to stumble across the FIRE movement, or Financial Independence Retire Early. More than half already claim membership despite their limited years in the workforce. Devotees of the movement typically boast high savings and investing rates combined with a zealous dedication to frugality. And therein lies the problem.

About 37 percent of the Gen Zers who say they’re part of the FIRE movement have nothing saved for retirement, according to a recent survey by consumer technology platform Credit Karma. In fairness, the eldest in Gen Z are 27 and the survey included those 18 and older, so it’s possible that some respondents are still in college and claiming a movement before even joining the workforce and starting a retirement plan.

Even with that consideration, the notion that 37 percent of people who want to retire early haven’t started the process doesn’t strike me as strange. Misinformed, sure. But not strange. It speaks to the optimistic delusion that comes with being in your early 20s and at the start of a career. There’s a vast amount of opportunity ahead and why shouldn’t you be able to earn a six-figure salary in just a few years? Polyworking or making it big as an influencer doesn’t feel outside the realm of possibility.

The reality though is that Gen Z has student debt levels that are 13 percent higher than what millennials faced at their age. And while the Card Act of 2009 may have helped them avoid the credit card debt millennials fell into early, Buy Now Pay Later offerings laid the perfect trap for them in the pandemic. Gen Z’s total average debt levels increased by 24.3 percent between 2020 and 2022, climbing from $16,043 to $25,851.

Perhaps it seems antithetical but battling financial pressure in your early 20s does make a movement like FIRE attractive.

Each previous generation has adopted FIRE for their own reasons. Gen X had already spent considerable time in the workforce and grown disillusioned with the long-term grind expected by the time books such as Your Money or Your Life and personal finance blogs popularised the movement. Millennials inherited a job market offering unstable employment, fuelling a desire to control our own destiny by opting out as quickly as possible. It’s a force that’s strong with Gen Z, too.

FIRE normalises, even praises, discussing finances and motivates its adherents to keep pushing their way out of debt and onto increased saving and investing rates. It also unites devotees against a common enemy: their employer.

I’ve long been a cynic of the FIRE movement. It’s seductive but felt like snake oil to me because those who evangelised the message rarely dug into two key issues: mental health and what it means to retire.

The pursuit of FIRE is often a band aid for deeper problems. Chronic stress, burnout, depression and anxiety are all factors that could be triggered by work, but work is not necessarily the root cause. It follows that quitting (or retiring) is often not the solution. After the newness of freedom wears off, you’re once again left with the same mental health issues that were pervasive in your previous life. Combining the ambition to retire early with the hard work of addressing underlying mental health issues or setting reasonable work boundaries could set up Gen Z for a more successful early retirement.

The second major issue is the odd interpretation of retire. Retirement isn’t typically seen as a career transition, but a point after which you no longer exchange your time and labour for a paycheque. There are certainly FIRE devotees who retire in the traditional sense at a young age. However, there are many who “retire” from one job just to pivot into another line of work that perhaps better aligns with creative passions, interests, or doesn’t pay well. Or one person retires, and their spouse works, which makes the argument of retirement complicated. Many notable figureheads within the FIRE movement earn an income from the content they create for their blogs, podcasts, and social media. Promoting FIRE is a job that earns them a living. That makes their original FIRE number (the sum needed to achieve financial independence, quite working and live off your nest egg) less relevant and isn’t necessarily something that can be replicated by those to whom they extol the virtues of the movement.

This isn’t to say FIRE is without its merits. Aggressively saving and investing for your future is admirable, but there is a part of me that wants to caution the youth of today to invest first in relationships and personal growth. Many a zealot of FIRE has worshipped at the altar of frugality and delayed pleasure to such an extent that it meant failing to live or nurture parts of themselves that don’t result in a monetary profit. Chasing the promotion or career with the highest paycheque to move up your opt-out date could mean being a less colourful version of yourself.

Gen Z would be better served by building a sustainable career and life they enjoy. Take the best tenets of FIRE such as making saving and investing a priority, values-based spending, thinking critically about what you want your life to look like and living below your means. The only way to have joy and contentment in retirement, at any age, is to truly live your life en route.

Erin Lowry is a Bloomberg Opinion columnist covering personal finance. She is the author of the three-part “Broke Millennial” series.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. This article was published in The Washington Post