FA Center: Gen Z is wildly unrealistic about how much money stocks, crypto and other investments will give them for retirement

Many in the Gen Z generation are essentially clueless about how to build up wealth over their lifetimes. A disturbingly large proportion of them have wildly unrealistic expectations about what they can achieve through their investing.

Consider a recent survey of more than 2,000 U.S. consumers conducted in late September by MagnifyMoney. The results: 27% of Gen Zers said they hoped to retire before the age of 50. According to my analysis of the typical Gen Zer’s financial situation, the chances are extremely remote that they will be able to retire that early — if at all.

I reached that conclusion by projecting how much retirement wealth the typical Gen Zer will accumulate by the age of 50. I focused on a hypothetical 25-year old, which is the upper-end of the age range for the generation, and made the following assumptions:

Earning the average salary for people that age (per Bureau of Labor Statistics data), and salary raises each year equal the national average.

401(k) is worth $26,000 (which is the Gen-Z median).

Contributes 15% of salary to the 401(k) (which is average for Gen Z, according to the Transamerica Center for Retirement Studies); I assumed that the employer match is an additional 3% (which is typical).

Invests 100% of the 401(k) into the stock market

Stock returns will exceed inflation over the next 25 years by 6% annualized (which is the U.S. average since 1793).

Given these assumptions, this Gen Zer by the time she turns 50 will have amassed a portfolio worth about $607,000 in today’s dollars. If she employs the standard 4% rule for yearly withdrawals from that portfolio, her annual income in retirement would be just over $24,000. That’s about 40% of her annual income in the last year before retirement. (All these amounts are expressed in current dollars.)

Yet even this finding, sobering as it is, is too optimistic. That’s because today’s stock market is wildly overvalued, making it unlikely that it will produce a 6% inflation-adjusted annualized return in coming years. Each of eight valuation measures with a long-term record of success suggests that stocks’ return in coming years will be below the historical average.

Some object to this bearish conclusion on the grounds that long-ago U.S. history is not relevant to the current stock market. But this argument, while compelling on the surface, doesn’t hold water. Consider what I found upon constructing a simple econometric model for each of the eight indicators, using only data back to 2000. On average they are projecting that the S&P 500

over the next decade will produce an inflation-adjusted total return of minus 5.4%.


Projected annualized S&P 500 10-year inflation-adjusted total return, based on historical relationship between indicator and market since 2000

Price/earnings ratio


CAPE ratio


Dividend yield


Price/book ratio


Price/sales ratio


Buffett Indicator




Average household equity allocation




If this average projection is even close to being accurate, our hypothetical Gen Zer will be in far worse shape than in the simulation I reported above. Consider how much she will have to retire on assuming stocks’ inflation-adjusted return in coming years is zero. In that case, she will have to live on less than $11,000 per year (in today’s dollars) upon retiring at age 50.

There’s more: The 4% rule is less applicable to those who retire before the traditional retirement age of 65. I explained why in a column this past summer. Basically, the odds of running out of money in retirement increase significantly as the number of years in retirement expand.

Get real

My analysis points to the crucial need to base our long-term financial plans on realistic assumptions. Not just Gen Zers, but all of us, are more likely to be financially comfortable in retirement to the extent we get an early start on a realistic financial plan.

Unfortunately, many investors are not only unaware that their plans are unrealistic, they have closed off one of the major channels through which they could get a reality check. According to the MagnifyMoney website, just 21% of respondents in their survey indicated that they currently are working with a financial adviser — and more than half (54%) said they have no plans to do so. This suggests to me that there is a dangerous level of overconfidence among investors about building up retirement wealth.

The study of history provides us with the opportunity to learn before it’s too late. With the stock and bond markets at or near all-time highs, now is the perfect time to do so.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at



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