Gen Z: What Retirement Would Look Like if You Began Investing $100 a Week Today
Retirement can feel impossibly far away when you’re in your 20s, but the financial decisions Gen Z makes right now matter more than they may realize. Small steady contributions can grow into life-changing wealth thanks to time, consistency and the power of compounding.
What $100 a Week Can Grow Into by Retirement
Even modest weekly contributions can turn into significant wealth when given decades to compound, according to Melanie Musson, a finance expert with Clearsurance.com. Even conservatively speaking, she said, if Gen Z adults started investing $100 a week today and didn’t increase their contributions at all, “they would have around $1 million by the time they retire.”
Robert R. Johnson, certified financial analyst and professor of finance at Creighton University, said that with a “well-diversified, common stock portfolio,” Gen Z could actually earn well over $3 million. “That is the power of compound interest.”
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Why Starting in Your 20s Makes an Extraordinary Difference
Starting early is the single most powerful advantage Gen Z has in hand. Gen Zers have a lot of time “to double [profits] again and again,” Musson said. Compound interest makes a big difference in growing savings, but it takes time to see its effects.
Paul Walker, financial consultant and author of “A Money Book Anyone Can Read,” added that the first stretch of savings always takes the longest.
“The next milestone arrives much faster,” he said, “and the one after that faster still. Your money begins working harder than you do.”
Choose Realistic Return Assumptions
Experts recommend that Gen Z plan by using conservative return estimates but also take more risks while they are young, with their longer time horizons. Breanna Seech, senior wealth advisor at Mariner Wealth Advisors, noted that young investors “tend to be quite risk-tolerant,” though they’ll benefit the most from staying invested over time rather than chasing hyped investments.
Musson suggested planning for a 7% rate of return, but Johnson said that history shows 8% and above is not uncommon, so long as young investors stay committed.
“It’s important to respect the value that diversification brings over long periods of time,” Seech said.
The Best Accounts for Growing Weekly Contributions
A $100-per-week habit grows fastest when funneled into tax-advantaged accounts first, like a 401(k) plan or Roth IRA, Johnson said, then supplemented by taxable investments. “The deposits grow tax-free until retirement, a huge benefit,” he said.
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