How millennials and Gen Z are planning for their financial futures

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As millennials and members of Generation Z think about their future finances, they are looking to save as well as previous generations, but they face an economic climate that has seen two one-in-a-lifetime downturns.

Erika.com founder Erika Kullberg, a lawyer and personal finance expert with more than 21 million followers across social media platforms, said she is not surprised that younger generations' wealth is expanding. Millennials and Gen Zers are "actively seeking out opportunities to increase their wealth through various means," even though they're "facing formidable economic challenges such as student loan debt and stagnant wages relative to the rising cost of living," Kullberg said in an email to Financial Planning's Tobias Salinger.

"I've observed a strong entrepreneurial spirit and a willingness to explore alternative avenues for financial growth," Kulberg added. "Many are leveraging technology and digital platforms to start businesses, invest in stocks and cryptocurrencies, and engage in side hustles. The increasing accessibility of financial education resources, both online and offline, has empowered them to make informed decisions about their money and investments. Younger generations have endless financial advice and information at their fingertips."

Younger clients are lacking in their knowledge of estate planning. According to research from Trust & Will, only 58% of millennials said they had ever discussed estate planning with an older family member, and 34% had no idea whether their parents have an estate plan.

"Estate planning is typically one of the last aspects of financial planning people want to discuss," Den Murley, a partner at Belonging Wealth Management in Longview, Texas, told Financial Planning's Nathan Place. "First, people generally don't like to think of their own mortality, regardless of age. Second, there may be a mindset that death is a distant, far-away event and there is plenty of time to get everything in order."

Added to this, Samuel Deane, financial advisor and president of Deane Wealth Management, said many millennials — as well as other generations — have mistaken notions about what estate planning entails and who it's for.

"There are lots of misconceptions about estate planning," Deane told Financial Planning. "One of the things that we hear is, 'Hey, I'm young, I'm single, I don't have any kids, which means I don't need an estate plan.' Or 'I don't have significant assets or wealth, so I don't need a trust.'"

Read more about how different generations are preparing for retirement.

Gen X and millennials willing to pay more in taxes for Medicare access

Health insurance company eHealth surveyed 1,000 Americans born between 1965 and 1996 to see how millennials and Gen Xers are reacting to the possible loss of the government-funded insurance program. Ninety-four percent still feel that they are entitled to Medicare in retirement, and 84% are willing to pay higher taxes to ensure its survival. However it's estimated that Medicare funds will run out by 2036 without Congressional action.

This is dire news for everyone trying to save enough for retirement by 65, notes Whitney Stidom, vice president of Medicare operations at eHealth. According to the 2022 Fidelity Retiree Health Care Cost Estimate, a couple should expect to spend $315,000 on health care during retirement — and that's with Medicare still in the picture.

"Medicare is really vital because as we age, our health care just becomes that much more important," Stidom said. "We're more likely to go to the doctor, and more health issues come up."

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Gen X and millennials would pay higher taxes to access Medicare

Millennials and Gen Z connect financial health to overall health

According to a recent McKinsey survey, advisors will continue to shed their once-primary roles as investment managers focused on portfolios and asset allocation as they assume the duties of life and wealth coaches, advising clients on health care, insurance, taxes, estates and broader-based financial wellness needs.

"As a millennial myself, I think this shift has been and will continue to be fueled by millennials and Gen Zers — the ones who believe to a greater extent than previous generations that financial health is intrinsically linked to physical and emotional well-being, and who will continue to seek financial planners who will not only manage their assets but advise them on how to achieve a balanced, fulfilling lifestyle," writes Samuel Deane, financial advisor and president of Deane Wealth Management.

The impact of next-generation investors on the financial advisory sector in years to come cannot be overstated. As millennials grapple with unprecedented financial challenges while setting their sights on future stability, the role of financial advisors becomes ever more pivotal.

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Millennials and Gen Z are in the driver's seat when it comes to holistic planning

Research shows millennials lack knowledge of estate planning

New research from Trust & Will, an estate planning services company, has shed light on millennials' lack of estate plans. Eighty-one percent of millennial Americans — who are currently between 28 and 43 years old — think it's important to have a will at their age, the study found. But only 36% have an estate plan of any kind.

"It just comes down to them thinking that maybe it's important, but it's not important right now," Samuel Deane, founder of Deane Wealth Management in Atlanta and a brand ambassador for Trust & Will, told Financial Planning's Nathan Place. "Or it's important, but I don't know what the next step would be."

Other findings from the study confirm this lack of knowledge. Only 58% of millennials said they had ever discussed estate planning with an older family member, and 34% had no idea whether their parents have an estate plan.

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Millennials know estate planning is important — but most still ignore it

What makes millennial and Gen Z clients more attractive?

Americans 42 years old or younger boosted their wealth at a higher rate than any other age group between 2019 and 2022, and a majority of millennials and Gen Zers now own homes or have retirement accounts, according to an analysis of Fed data released earlier this year by research firm Cerulli Associates.

To be sure, many advisors and other financial professionals are already working with younger clients — especially those who are from those generations. Millennials and Gen Zers work harder and achieve more success than the popular caricatures suggest, and their interest in long-term planning with potential for relationships spanning decades of accumulation make them an attractive base of clients, according to five experts who spoke with Financial Planning.

"I like working with younger clients — the Gen Zers and the millennials — simply because the idea of financial planning is a lot different for them than the baby boomers," Raman Singh of Phoenix-based Singh Private Wealth Management told Financial Planning's Tobias Salinger. "They like the idea of working with a financial planner who keeps them accountable."

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'Everyone's balling' — but is the industry ready for young wealth?

Younger baby boomers lack in retirement savings compared to the rest of their generation

According to a study by the Center for Retirement Research at Boston College, there is a striking difference between "late boomers" — those born from 1960 to 1965 — and "early boomers," born between 1948 and 1953. By the time they reached their 50s, the study found, the late boomers had 19% less retirement wealth than the early ones did at the same age.

"The late boomers were hit really hard by the Great Recession," Anqi Chen, one of the study's co-authors, told Financial Planning's Nathan Place. "It was the earnings lost during the recession that really set them back."

Why was the downturn more damaging for late boomers? It's a matter of life stages. Typically, Chen said, Americans reach their peak earning years in their 40s and early 50s. But for those at the younger end of the baby boom, those were exactly the years when the economy was in crisis — in 2007 to 2009, late boomers were somewhere between 42 and 49 years old.

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Younger baby boomers face deep shortfall in retirement savings